You own a furniture manufacturing company. You are looking to expand into glass furniture and need to buy new manufacturing equipment to manufacture this type of furniture. You have researched many suppliers but have found that two machines will best suit your needs. The cost of machine 1 is $90,000, and the cost of machine 2 is $110,000. The estimated net profits the machines will generate are in the following table:
Net Profit |
Machine 1 (cost $90,000) |
Machine 2 (cost $110,000) |
Year 1 |
$20,000 |
$10,000 |
Year 2 |
$30,000 |
$20,000 |
Year 3 |
$40,000 |
$40,000 |
Year 4 |
$20,000 |
$60,000 |
Year 5 |
$20,000 |
$50,000 |
Total |
$130,000 |
$180,000 |
ARR refers to accounting rate of return, it is the percentage return on a project with respect to its initial cash outflow or investment.
ARR is calculated as average net profit divided by average investment.
Using the cashflows given, we can determine the ARR as follows:
Q: The Sisyphean Company has a bond outstanding with a face value of $1,000 that reaches maturity in 10...
A: Hence, the semi -annual interest payment is $44.5.The semi- annual interest payment is calculated by...
Q: A firm’s balance sheets for year-end 2018 and 2019 contain the following data. All items are in mill...
A: Working capital refers to the amount that a company needs to meet its operating expenses. Working ca...
Q: You have just been hired as a financial analyst for Barrington Industries. Unfortunately, company he...
A: Computation of ending cash balance of the firm:The ending cash balance is $250,000.Excel spread shee...
Q: Stock X has a 9.5% expected return, a beta coetticient ot 0.8, and a 35% standard deviation of expec...
A: As per the rule, i will be answering first three sub-parts of the question. Please repost the other ...
Q: I am currently working on some financial problems and accidentally asked more questions than permitt...
A: To calculate the expected return, first the weights of each stock in the portfolio is calculated as ...
Q: Problem 11-1 Cost of Equity (LG11-3) Diddy Corp. stock has a beta of 1.3, the current risk-free...
A: According to capital asset pricing model (CAPM):
Q: Rank the following three stocks by their risk-return relationship, best to worst. Night Ryder has an...
A: Volatility can be described as the method to evaluate the spread of returns associated with an asset...
Q: Ba short position in a fulures coedracd Csold a forward coetract D. purchased a forwand contracd E. ...
A: Option is a derivative instrument which gives the buyer the right to buy or sell an asset at a prede...
Q: If $10,000 is invested in a certain business at the start of the year, the investor will receive $3,...
A: Computation of present value:Hence, the present value is $1,151.30.