Bhupatbhai !Required InformationThe Foundational 15 (Algo) [LO12-1, LO12-2, LO12-3, LO12-5, LO12-6][The following information applies to the questions displayed below.]Cardinal Company is considering a five-year project that would require a $2,955,000Investment in equipment with a useful life of five years and no salvage value. The company'sdiscount rate is 18%. The project would provide net operating Income In each of five years asfollows:SalesVariable expensesContribution marginFixed expenses:of-pocket costsDepreciationAdvertising, salaries, and other fixed out-$ 750,000591,000Total fixed expenses$ 2,865,0001,015,0001,850,0001,341,000$ 509,000Net operating incomeClick here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discountfactor(s) using table.Foundational 12-13 (Algo)13. Assume a postaudit showed that all estimates (including total sales) were exactly correct except for thevariable expense ratio, which actually turned out to be 45%. What was the project's actual net present value?(Negative amount should be indicated by a minus sign. Round Intermediate calculations and final answer tothe nearest whole dollar amount.)Net present value

What is the Variable Expense ratio?The variable expense ratio is the ratio of variable expenses to…

Answered: ! Required Information The Foundational…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter9: Capital Budgeting And Cash Flow Analysis

Section: Chapter Questions

Problem 17P

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Required Information The Foundational 15 (Algo) [LO12-1, LO12-2, LO12-3, LO12-5, LO12-6] [The following information applies to the questions displayed below.] Cardinal Company is considering a five-year project that would require a $2,955,000 Investment in equipment with a useful life of five years and no salvage value. The company's discount rate is 18%. The project would provide net operating Income In each of five years as follows: Sales Variable expenses Contribution margin $ 2,865,000 1,015,000 1,850,000 Fixed expenses: Advertising, salaries, and other fixed out- of-pocket costs Depreciation $ 750,000 591,000 Total fixed expenses 1,341,000 $ 509,000 Net operating income Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using table. Foundational 12-14 (Algo) 14. Assume a postaudit showed that all estimates (including total sales) were exactly correct except for the variable expense ratio, which actually turned out to be 45%. What…
Required information The Foundational 15 (Algo) [LO12-1, LO12-2, LO12-3, LO12-5, LO12- 6] [The following information applies to the questions displayed below.] Cardinal Company is considering a five-year project that would require a $2,850,000 investment in equipment with a useful life of five years and no salvage value. The company's discount rate is 18%. The project would provide net operating income in each of five years as follows: Sales Variable expenses Contribution margin Fixed expenses: Advertising, salaries, and other fixed out-of-pocket costs Depreciation Total fixed expenses $ 2,857,000 1,011,000 1,846,000 $ 799,000 570,000 1,369,000 $ 477,000 Net operating income Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using table. Foundational 12-13 (Algo) 13. Assume a postaudit showed that all estimates (including total sales) were exactly correct except for the variable expense ratio, which actually turned out to be 45%. What…
! Required Information The Foundational 15 (Algo) [LO12-1, LO12-2, LO12-3, LO12-5, LO12-6] [The following information applies to the questions displayed below.] Cardinal Company is considering a five-year project that would require a $2.765,000 investment in equipment with a useful life of five years and no salvage value. The company's discount rate is 14%. The project would provide net operating income in each of five years as follows: Sales Variable expenses $ 2,851,000 1,150,000 Contribution margin Fixed expenses: Advertising, salaries, and other fixed out- of-pocket costs Depreciation $ 670,000 553,000 1,701,000 Total fixed expenses Net operating income 1,223,000 $ 478,000 Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using table. Foundational 12-3 (Algo) 3. What is the present value of the project's annual net cash inflows? (Round your final answer to the nearest whole dollar amount.) Present value
E11-2 (Algo) Calculating Accounting Rate of Return, Payback Period (LO 11-1, 11-2] Bartlett Car Wash Co. is considering the purchase of a new facility. It would allow Bartlett to increase its net income by $93,475 per year. Other information about this proposed project follows: Initial investment Useful life Salvage value $430,760 8 years $ 56,000 Assume straight line depreciation method is used. Required: 1. Calculate the accounting rate of return for Bartlett. (Round your percentage answer to 2 decimal places.) 2. Calculate the payback period for Bartlett. (Round your answer to 2 decimal places.) 1. Accounting Rate of Retum 2. Payback Period years
Required Information [The following information applies to the questions displayed below.] Project A requires a $365,000 initial investment for new machinery with a five-year life and a salvage value of $42,000. The company uses straight-line depreciation. Project A is expected to yield annual net income of $25,300 per year for the next five years. Compute Project A's payback period. Choose Numerator: Payback Period 7 Choose Denominator: = Payback Period Payback period =
The Foundational 15 (Algo) [LO12-1, LO12-2, LO12-3, LO12-5, LO12-6] [The following information applies to the questions displayed below.] Cardinal Company is considering a five-year project that would require a $2,890,000 investment in equipment with a useful life of five years and no salvage value. The company's discount rate is 12%. The project would provide net operating income in each of five years as follows: Sales Variable expenses Contribution margin Fixed expenses: Advertising, salaries, and other fixed out- $ 641,000 578,000 of-pocket costs Depreciation $ 2,739,000 1,100,000 1,639,000 Total fixed expenses Net operating income 1,219,000 $ 420,000 Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using table.
Use the following information to answer questions 4 and 5 (including their appropriate subsections) D. Newcombe & Associates, Inc., is considering the introduction of a new product. Production of the new product requires an investment of $140,000 in equipment that has a five-year life. The equipment has no salvage value at the end of five years and will be depreciated on a straight-line basis. Newcombe's required return is 15%, and the tax rate is 34%. The firm has made the following forecasts: Unit Sales Price per unit Variable cost per unit Fixed cost per year Base Case 2,000 $55 $22 $10,000 Lower Bound 1,800 $55 $22 $10,000 Upper Bound 2,200 $55 $22 $10,000 Question 4 (4.1) Assume the base-case forecasts for the Newcombe project. Compute the accounting break- even point.
Required information PA11-2 (Algo) Making Automation Decision [LO 11-1, 11-2, 11-3, 11-5) (The following information applies to the questions displayed below.) Beacon Company is considering automating its production facility. The initial investment in automation would be $6.78 million, and the equipment has a useful life of 5 years with a residual value of $1,080,000. The company will use straight- line depreciation. Beacon could expect a production increase of 48,000 units per year and a reduction of 20 percent in the labor cost per unit. Current (no Automation) 83,000 units Per Unit $ 94 Proposed (automation) 131,000 unita Per Production and sales volume Sales revenue Total Unit $94 Total $ 2 Variable costs Direct materials Direct labor Variable manufacturing overhead Total variable manufacturing $ 18 $18 25 10 10 53 costs Contribution nargin Fixed manufacturing conts $ 41 $ 46 7. $ 1,160,000 $2,330,000 Net operating income PA11-2 Part 2 2. Determine the project's accounting rate of…
! Required information PA11-2 (Algo) Making Automation Decision [LO 11-1, 11-2, 11-3, 11-5] [The following information applies to the questions displayed below.] Beacon Company is considering automating its production facility. The initial investment in automation would be $6.97 million, and the equipment has a useful life of 5 years with a residual value of $1,020,000. The company will use straight- line depreciation. Beacon could expect a production increase of 39,000 units per year and a reduction of 20 percent in the labor cost per unit. Production and sales volume Sales revenue Variable costs Direct materials Direct labor Variable manufacturing overhead Total variable manufacturing costs Contribution margin Fixed manufacturing costs Net operating income Current (no automation) 86,000 units Proposed (automation) 125,000 units Per Unit $ 98 Total $ ? Per Unit $ 98 Total $ ? $ 15 12224 $ 15 25 ? 12 52 ? $ 46 ? 1,110,000 ? $ 51 ? 2,220,000 ? PA11-2 Part 4 Required: 4. Using a discount…
The Bruin's Den Outdoor Gear is considering a new 7-year project to produce a new tent line. The equipment necessary would cost $1.95 million and be depreciated usi$882,038 $991,492 $854,426 $750,550 $1,103,426ng straight-line depreciation to a book value of zero. At the end of the project, the equipment can be sold for 15 percent of its initial cost. The company believes that it can sell 30,500 tents per year at a price of $78 and variable costs of $37 per tent. The fixed costs will be $535,000 per year. The project will require an initial investment in net working capital of $249,000 that will be recovered at the end of the project. The required rate of return is 12.1 percent and the tax rate is 21 percent. What is the NPV? A. $882,038 B. $991,492 C. $854,426 D. $750,550 E. $1,103,426
A company is considering two alternatives with regards to equipment which it needs. The alternatives are as follows: Alternative A: Purchase Cost of Equipment 703,668700,000 Salvage Value 100,454100,000 Daily operating cost 501500 Economic life, years 10 Alternative B: Rental at 1,5751,500 per day. At 18% interest, how many days per year must the equipment be in use if Alternative A is to be chosen.
This is problem 12-8 on page 429 of your text: You must evaluate the purchase of a spectrometer for the R&D department. The base price is $140,000, and it would cost another $30,000 to modify the equpment for special use by the firm. The equipment falls into the MACRS 3-year class and would be sold after 3 years for $60,000. The applicable depreciation rates are 33%, 45%, 15%, and 7% as discussed in Appendix 12A. The equipment would require an $8,000 increase in net operating working capital (spare parts inventory). The project would have no effect on revenues, but it should save the firm $50,000 per year in before-tax labor costs. The firm's marginal federal-plus-state tax rate is 40%. The firm's WACC ("hurdle rate" or "required rate of return") is 12%

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