Shalom Company's Peace Department had the following information last year: 18% Minimum required rate of return Average operating assets Traceable fixed expenses Variable expenses Sales 2,000,000 90,000 310,000 1,000,000 Suppose you were presented Project Piss that has ROI of 25%. Will Peace Department most likely accept the project? Yes or no? Use the underlined words as your choice. Input answers in capital letters.

Shalom Company's Peace Department had the following information last year: 18% Minimum required rate of return Average operating assets Traceable fixed expenses Variable expenses Sales 2,000,000 90,000 310,000 1,000,000 Suppose you were presented Project Piss that has ROI of 25%. Will Peace Department most likely accept the project? Yes or no? Use the underlined words as your choice. Input answers in capital letters.

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter16: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 40P

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Casey Nelson is a divisional manager for Pigeon Company. His annual pay raises are largely determined by his division’s return on investment (ROI), which has been above 23% each of the last three years. Casey is considering a capital budgeting project that would require a $4,700,000 investment in equipment with a useful life of five years and no salvage value. Pigeon Company’s discount rate is 19%. The project would provide net operating income each year for five years as follows: Sales $ 4,400,000 Variable expenses 2,000,000 Contribution margin 2,400,000 Fixed expenses: Advertising, salaries, and other fixed out-of-pocket costs $ 800,000 Depreciation 940,000 Total fixed expenses 1,740,000 Net operating income $ 660,000 Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using tables. Required: 1. What is the project’s net present value? Net present value 2. What is the project’s…
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