HelpSalesOperating incomeInvested capital$8,100,000648,0009,000,000In an effort to make something out of nothing and to salvage the current year's performance, Washburn wascontemplating implementation of some or all of the following four strategies:a. Write off and discard $102,000 of obsolete inventory. The company will take a loss on the disposal.b. Accelerate the collection of $132,000 of overdue customer accounts receivable.c. Stop advertising through year-end and drastically reduce outlays for repairs and maintenance. These actions areexpected to save the division $237,000 of expenses and will conserve cash resources.d. Acquire two competitors that are expected to have the following financial characteristics:ProjectedSalesProjected OperatingExpenses$3,330,0006,350,000Projected InvestedCapital$11,750, 0008,000,000Anderson ManufacturingPalm Beach Enterprises$4,740, 0006,990, 000Required:1-a. Define sales margin, capital turnover, and return on investment.1-b. Compute sales margin, capital turnover, and return on investment for the Reliable's Sporting Goods Division over the past ninemonths.Prev1 2 3 4of 14Next >

Operating income is an accounting metric that measures the amount of profit created by a company's…

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Corporate Fin Focused Approach

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ISBN:9781285660516

Author:EHRHARDT

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Chapter12: Corporate Valuation And Financial Planning

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Problem 2STP

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Amazon in OKC has just invested $250,000 in equipment having a negligible salvage value (SV 0) regardless of when the equipment if replaced. O&M costs equal $50,000 the first year and increase $10.000 per year. Based on a MARR of 10% What is the Capital Recovery (CR) cost for Year 4? A. $86,428 B. $60,317 C. $47,320 D. $39,569
Typed solution only A company is trying to make a long-term investment decision: should it or should it not manufacture a new product? The company believes that$208,000 would need to be immediately invested into buying the required production equipment. At the end of Year 4 this investment project is likely to end. When that happens, all used equipment will be sold and bring the company $187,000 as the after-tax salvage value. A cash reserve in the amount of $38,000 would need to be set aside when the project begins, so that the company can cover any kind of repair costs to maintain the equipment, should those arise. This cash reserve will be increased by $6,000 each year and recovered when the project ends. The company estimates $75,000in after-tax profits (i.e., operating cash flow) each year of the project. The required rate of return is 10.8%. Calculate the Net Present Value of this project. Increase decimal places for any intermediate calculations, from the default 2 to 6 or…
Walden Industries is considering investing in production−management software that costs $620,000, has $60,000 residual value, and leads to cost savings of $2,310,000 per year over its five−year life. Calculate the average amount invested in the asset that should be used for calculating the accounting rate of return. A. $340,000 B. $60,000 C. $680,000 D. $620,000
Walden Industries is considering investing in production-management software that costs $600,000, has $67,000 residual value, and leads to cost savings of $2,300,000 per year over its five-year life. Calculate the average amount invested in the asset that should be used for calculating the accounting rate of return. Question content area bottom Part 1 A. $333,500 В. $667,000 С. $67,000 D. $600,000
[EXCEL] Payback: Northern Specialties just purchased inventory-management computer software at a cost of $1,645,276. Cost savings from the investment over the next six years will produce the following cash flow stream: $212,455, $292,333, $387,479, $516,345, $645,766, and $618,325. What is the payback period on this investment? please use excel
Saved A company is considering the following three Investment projects (Ignore income taxes.): Investment required Present value of cash inflows Project C $46,800 $ 51,948 Project D $ 53,300 $ 61,828 Project E $110,500 $ 120,445 Rank the projects according to the profitablity index, from most profitable to least profitable. Multiple Choice D. C. E C.E. D E. C. D E. D. C
Saved A company is considering the acquisition of o new machine that costs $429,000 and has a useful life of 5 years with no solvage velue. The incremental net operating incomne and incremental net cosh flows that would be produced by the mochine oare (Ignore income taxes.) Incremental Net Incremental Operating Income Net Cash Flows $ 70,000 $ 76,000 $ 87,000 $ 50,000 $ 92,000 Year 1 $ 152,080 Year 2 $165,000 $ 152,000 $ 154,000 Year 3 Year 4 Year 5 Assume cash flows occur uniformly throughout a year except for the initial investment. The payback period of this investment is closest to: (Round your answer to 1 decimal place.) Multipie Cholce O 5.0 years O 21years 4.3 years 27 years
At the end of a capital project the equipment has been fully depreciated and is sold for $30,000. Working capital in the amount of $10,000 is also no longer needed for the project and converted to cash. The company's tax rate is 40%.What is the total terminal cash flow for this project? A.22,000 B.8,000 C.28,000 D.40,000
• Joe & Dough Cafe is contemplating the purchase of a new $1,049,000 computer-based order entry system • The system will be depreciated straight-line to zero over its three-year life . It will be worth $156,300 at the end of that time • You will save $423,500 before taxes per year in order processing costs • You will be able to reduce working capital by $115,764 (this is a one-time reduction). The net working capital will return to its original level when the project ends . The tax rate is 35 percent Don't round intermediate calculations. Unless otherwise specified, enter your final answers as an integer without decimals or using 1,000 separators, e.g., enter 1234 for 1234.56. A negative number (e.g., a cash outflow) should be indicated with a "-" sign. 1. What is the year EBIT: $ 2. What is the yearly OCF: $ 3. What is the change in NOWC in year 3: $ 4. What is the after-tax terminal value: $ 5. What is the internal rate of return for this three-year project: IRR = two decimals, e.g.,…
A company is planning to undertake an investment project. The following data have been calculated for two alternatives, A and B: A В Initial Investment outlay ($) 200,000 275,000 Freight charges 20,000 30,000 Set up charges 5,000 7,000 Economic Life (years) 10 10 Liquidation Value at end of economic life($) 12,000 17,000 Other fixed costs ($/yr) 4,000 20,000 Production and sales volume (units/year) 9,000 12,000 Sales Price ($/unit) 15 15 Variable costs ($/unit) 2.45 2.00 Rate of Interest (%/year) 6% 6% 1. Ascertain the preferred project using: a. The profit comparison method. . b. The average rate of return method. The static payback method C. Are the results of the Project selection process 2. Re-evaluate the projects using the Net Present Value. the same? If different, what reasons can you offer?
Management of TSC, Inc. is evaluating a new $71,000 investment with the following estimated cash flows: Year Cash Flow 1 $ 20,000 2 31,000 3 37,000 4 51,000 The firm's cost of capital is 12 percent and the project will require that the firm spend $14,000 to terminate the project. Use Appendix B to answer the question. Use a minus sign to enter a negative value, if any. Round your answer to the nearest dollar. The NPV of the investment is $. Should the firm make the investment? The firm Select make the investment.
[The following information applies to the questions displayed below.] Following is information on an investment in a manufacturing machine. The machine has zero salvage value. The company requires a 6% return from its investments. Initial investment Net cash flows: Year 1 Year 2 Year 3 QS 11-20 (Algo) Net present value with uneven cash flows and salvage value LO P3 $ (220,000) 175,000 128,000 89,000 Assume that instead of a zero salvage value, as shown above, the machine has a salvage value of $20,500 at the end of its three-year life. Compute the machine's net present value. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided. Round all present value factors 4 decimal places. Round present value amounts to the nearest dollar.) Year 1 Year 2 Year 3 Year 3 salvage value Totals Initial investment Net present value Net Cash Flows Present Value Factor Present Value of Net Cash Flows

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