Question
In: Finance
Simply Chocolate Company is considering two possible expansion plans.Proposal X involves opening five stores in North...
Simply Chocolate Company is considering two possible expansion plans.Proposal X involves opening five stores in North Carolina at a cost of $2,400,000. Under Proposal Y, the company would focus on Virginia and open six stores at a cost of $3,000,000. The following information is given for the two proposals:
Proposal X Proposal Y
Required investment $2,400,000 $3,000,000
Estimated life 10 years 10 years
Estimated residual value $200,000 $200,000
Estimated annual net cash flows $450,000 $580,000
Required rate of return 14% 14%
Based on the above following problem, Required: for each proposal, you are asked to calculate
a. Pay back Period
b.Accounting Rate of Return
c.Net Present Value
d.Profitability Index
Solutions
jeff jeffy answered 3 months agoRelated Solutions
Simply Chocolate Company is considering two possible expansion plans.Proposal X involves opening five stores in North...
Simply Chocolate Company is considering two possible expansion
plans.Proposal X involves opening five stores in North Carolina at
a cost of $2,400,000. Under Proposal Y, the company would focus on
Virginia and open six stores at a cost of $3,000,000. The following
information is given for the two proposals:
Proposal
X
Proposal Y
Required
investment
$2,400,000 $3,000,000
Estimated
life
10
years
10 years
Estimated residual
value
$200,000
$200,000
Estimated annual net cash
flows
$450,000
$580,000
Required rate of...
Simply Chocolate Company is considering two possible expansion plans.Proposal X involves opening five stores in North...
Simply Chocolate Company is considering two possible expansion
plans.Proposal X involves opening five stores in North Carolina at
a cost of $2,400,000. Under Proposal Y, the company would focus on
Virginia and open six stores at a cost of $3,000,000. The following
information is given for the two proposals:
Proposal
X
Proposal Y
Required
investment
$2,400,000 $3,000,000
Estimated
life
10
years
10 years
Estimated residual
value
$200,000
$200,000
Estimated annual net cash
flows
$450,000
$580,000
Required rate of...
V. S. Yogurt is considering two possible expansion plans. Proposal A involves opening 10 stores in...
V. S. Yogurt is considering two possible expansion plans.
Proposal A involves opening 10 stores in northern California at a
total cost of $3,150,000. Under another strategy, Proposal B, V. S.
Yogurt would focus on southern California and open six stores for a
total cost of $2,500,000. Selected data regarding the two proposals
have been assembled by the controller of V. S. Yogurt as
follows.
Proposal A
Proposal B
Required investment
$
3,150,000
$
2,500,000
Estimated life of store locations...
Has Beans Inc. operates a chain of lunch shops. The company is considering two possible expansion...
Has Beans Inc. operates a chain of lunch shops. The company is
considering two possible expansion plans. Plan A would open eight
smaller shops at a cost of $8,740,000. Expected annual net cash
inflows are $1,650,000 with zero residual value at the end of ten
years. Under Plan? B, Has Beans would open three larger shops at a
cost of $ 8,540,000. This plan is expected to generate net cash
inflows of $1,050,000 per year for ten ?years, the estimated...
Cuppa Inc operates a chain of lunch shops. The company is considering two possible expansion plans....
Cuppa Inc operates a chain of lunch shops. The company is
considering two possible expansion plans. Plan A would open eight
smaller shops at a cost of $8,240,000. Expected annual net cash
inflows are $ 1,650,000 with zero residual value at the end of ten
years. Under Plan B, Cuppa would open three larger shops at a cost
of $ 8,140,000. This plan is expected to generate net cash inflows
of $ 1,500,000 per year for ten years, the estimated...
Solar Designs is considering an investment in an expanded product line. Two possible types of expansion...
Solar Designs is considering an investment in an expanded
product line. Two possible types of expansion are under review.
After investigating the possible outcomes, the company made the
estimates shown in the following table:
Initial investment $13,000 $13,000
Annual rate of return
Pessimistic 12% 10%
Most likely 23% 23%
Optimistic 24% 26%
The pessimistic and optimistic outcomes occur with a probablity
of 25%, and the most likely outcome occurs with a probability of
50%.
a. Determine the range of...
Division D is considering two possible expansion plans. Plan A would expand a current product line...
Division D is considering two possible expansion plans. Plan A
would expand a current product line at a cost of $8,440,000.
Expected annual net cash inflows are $1,500,000, with zero
residual value at the end of 10 years. Under Plan B, Division D
would begin producing a new product at a cost of $8,300,000. This
plan is expected to generate net cash inflows of $1,080,000 per
year for 10 years, the estimated useful life of the product line.
Estimated residual...
Northeastern Insurance Company is considering opening an office in the U.S. The two cities under consideration...
Northeastern Insurance Company is considering opening an office
in the U.S. The two cities under consideration are
Philadelphia and New York.
The factor ratings (higher scores are better) for the two
cities are given in the following table.
Factor
Weight
PhiladelphiaPhiladelphia
New YorkNew York
Customer convenience
0.25
75
75
Bank accessibility
0.20
40
85
Computer support
0.20
90
70
Rental costs
0.15
85
50
Labor costs
0.10
80
50
Taxes
0.10
90
55
Based on the given information, the...
Northeastern Insurance Company is considering opening an officein the U.S. The two cities under consideration...
Northeastern Insurance Company is considering opening an office
in the U.S. The two cities under consideration are Philadelphia and
New York. The factor ratings (higher scores are better) for the
two cities are given in the following table.FactorWeightPhiladelphiaNew YorkCustomer convenience0.257080Bank accessibility0.203595Computer support0.209070Rental costs0.159555Labor costs0.107545Taxes0.108550Based on the given information, the best location for
Northeastern Insurance Company to open the office is _________ with
a total weighted score of______.(Enter your response rounded to two decimal places.)
ABC Stores is planning its store expansion for this year's capital budget. They have five potential...
ABC Stores is planning its store expansion for this year's
capital budget. They have five potential locations, but there is a
hard limit of $27.5 million on the amount that can be spent year on
expansion. ABC wants to pick the best package of store expansions,
given the six-year financial projections shown in the table below.
Because of differences in state laws, local tax incentives,
build-versus-lease options, and local economic conditions, the
annual cash flow projections for the five potential...
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