Question
In: Accounting
NELMA Corporation has provided the following data concerning a proposed investment project: Initial investment $320,000 Inventories...
NELMA Corporation has provided the following data concerning a proposed investment project: Initial investment $320,000 Inventories and Working Capital $14,000 Life of the project 5 years Annual Cash Inflows $100,000 Annual Operating Cash Expenses $12,000 Salvage value $44,000 The company has paid $55,000 for the market study that provided all above expectations. The company uses a discount rate of 11%. Required: a. Compute the Net present value (NPV) and decide if the project is worth accepting? b. Compute the Profitability Index (PI) of the project. Explain c. What is the maximum amount NELMA Corporation can invest on this project? d. Payback Period, NPV, and Profitability Index are three alternative methods for evaluating capital budgeting projects. What are the advantages and disadvantages of each method? e. Explain three difficulties associated with using discounted cash flow analysis in capital budgeting decisions.
Solutions
ekkarill92 answered 1 year agoRelated Solutions
Ducks inc has provided the following data to be used to evaluate a proposed investment project:...
Ducks inc has provided the following data to be used to evaluate
a proposed investment project:
Investment $880,000
Annual Cash Receipt $660,000
Life of the project 8 years
Annual cash expenses $330,000
Salvage value $88,000
Tax rate 30%
For tax purpose the entire initial investment without any
reduction for salvage value will be depreciated over 7 years. The
company uses a discount rate of 12%.
When computing the...
Joetz Corporation has gathered the following data on a proposed investment project (Ignore income taxes.): Investment...
Joetz Corporation has gathered the following data on a proposed
investment project (Ignore income taxes.):
Investment required in equipment
$
37,000
Annual cash inflows
$
8,800
Salvage value of equipment
$
0
Life of the investment
15
years
Required rate of return
10
%
The company uses straight-line depreciation on all equipment.
Assume cash flows occur uniformly throughout a year except for the
initial investment.
The simple rate of return for the investment (rounded to the
nearest tenth of a...
Joetz Corporation has gathered the following data on a proposed investment project (Ignore income taxes.): Investment...
Joetz Corporation has gathered the following data on a proposed
investment project (Ignore income taxes.):
Investment required in equipment
$
35,500
Annual cash inflows
$
8,200
Salvage value of equipment
$
0
Life of the investment
15
years
Required rate of return
10
%
The company uses straight-line depreciation on all equipment.
Assume cash flows occur uniformly throughout a year except for the
initial investment.
Click here to view Exhibit 13B-1 and Exhibit 13B-2, to determine
the appropriate discount factor(s)...
Joetz Corporation has gathered the following data on a proposed investment project (Ignore income taxes.): Investment...
Joetz Corporation has gathered the following data on a proposed
investment project (Ignore income taxes.):
Investment required in equipment
$
31,000
Annual cash inflows
$
6,400
Salvage value of equipment
$
0
Life of the investment
15
years
Required rate of return
10
%
The company uses straight-line depreciation on all equipment.
Assume cash flows occur uniformly throughout a year except for the
initial investment.
Click here to view Exhibit 13B-1 and Exhibit 13B-2, to determine
the appropriate discount factor(s)...
Joetz Corporation has gathered the following data on a proposed investment project (Ignore income taxes.): Investment...
Joetz Corporation has gathered the following data on a proposed
investment project (Ignore income taxes.):
Investment required
in equipment
$
30,500
Annual cash inflows
$
6,200
Salvage value of equipment
$
0
Life of the investment
15
years
Required rate of return
10
%
The company uses straight-line depreciation on all equipment.
Assume cash flows occur uniformly throughout a year except for the
initial investment.
Click here to view Exhibit 13B-1 and Exhibit 13B-2, to determine
the appropriate discount factor(s)...
Joetz Corporation has gathered the following data on a proposed investment project (Ignore income taxes.): Investment...
Joetz Corporation has
gathered the following data on a proposed investment project
(Ignore income taxes.):
Investment required
in equipment
$
33,500
Annual cash inflows
$
7,400
Salvage value of equipment
$
0
Life of the investment
15
years
Required rate of return
10
%
The company uses
straight-line depreciation on all equipment. Assume cash flows
occur uniformly throughout a year except for the initial
investment.
Click here to view
Exhibit 13B-1 and Exhibit 13B-2, to determine the appropriate
discount factor(s)...
ABC Corporation has provided the following data concerning manufacturing overhead for May:
ABC Corporation has provided the following data concerning manufacturing overhead for May: Actual manufacturing overhead incurred Rs. 66,000Manufacturing overhead applied to Work in Process Rs. 62,000The Corporation's gross profit was Rs. 225,000 prior to closing out its Manufacturing Overhead account. The Corporation closes out its Manufacturing Overhead account to Cost of Goods Sold. What would be the gross profit after closing manufacturing overhead account:
8) Dipaola Corporation has provided the following data concerning last month's operations.
8) Dipaola Corporation has provided the following data concerning last month's operations. Purchases of raw materials $ 26,000 Indirect materials included in manufacturing overhead $ 6,000 Direct labor cost$ 58,000Manufacturing overhead applied to Work in Process$ 87,000Overapplied overhead $ 6,000 BeginningEndingRaw materials inventory $ 12,000 $ 18,000 Work in process inventory $ 46,000 $ 64,000Finished goods inventory $ 31,000 $ 46,000 How much is the direct materials cost for the mouth on the Schedule of Cost of Goods Manufactured? A) $38,000 B) $32,000 C) $14,000 D) $26,000
Primare Corporation has provided the following data concerning last month’s manufacturing operations.
Primare Corporation has provided the following data concerning last month’s manufacturing operations.
Purchases of raw materials
$
32,000
Indirect materials included in manufacturing overhead
$
4,760
Direct labor
$
58,500
Manufacturing overhead applied to work in process
$
87,700
Underapplied overhead
$
4,150
Inventories
Beginning
Ending
Raw materials
$
10,200
$
18,700
Work in process
$
54,600
$
67,800
Finished goods
$
33,500
$
42,600
Required:
1. Prepare a schedule of cost of goods manufactured...
Primare Corporation has provided the following data concerning last month’s manufacturing operations.
Primare Corporation has provided the following data concerning
last month’s manufacturing operations. Required: 1. Prepare a schedule of cost of goods manufactured for the month. 2. Prepare a schedule of cost of goods sold for the month. Assume the underapplied or overapplied overhead is closed to Cost of Goods Sold.
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