A firm is evaluating whether to build a new factory. The proposed investment will cost the firm $1 million to construct and provide cash savings of $200,000 per year over the next 10 years.

(1) What rate of return does the investment offer?

(2) What is the maximum risk-free rate under which the firm is willing to make this investment?

(3) If the firm were to invest another $500,000 in the facility at the end of 5 years, it would extend the life of the project for 4 years, during which time it would continue receiving cash savings of $150,000. What is the internal rate of return for this additional investment?

1. The standard cost for material and labour in a manufacturing process is provided per unit as:

Material cost 5kgs                         shs.50

Labour cost 20hours                     shs.10

Material consumed in producing 500 units was Shs.25,650 against 2,700kgs of material. Wages paid was Sh6,050 for 11,600 hours, including 20 hours which was idle time due to machine breakdown.

Required:

1. Material cost variance
2. Material price variance
3. Material usage variance
4. Labour cost variance
5. Labour rate variance

“Modigliani and Miller (MM) suggested that in a perfect world with no taxes or bankruptcy
cost, the dividend policy is irrelevant. They proposed that the dividend policy of a company
has no effect on the stock price of a company or the company’s capital structure.” (Ani 2016)
Based on the above statement you are required write an essay on dividend irrelevance and
capital structure theories that has been originally advanced by Franco Modigliani and Merton
H. Miller (Modigliani and Miller 1958). In your demonstration you must critically reflect on
corporate tax consideration and firm values in contemporary world.

Your company is planning a $216,000 to invest in new equipment. This cost will be depreciated on a straight-line basis over a 4-year period. They can salvage it for $45,000.  You need to invest $40,000 in new Net Working Capital, which will be returned at the end of the project.  The new equipment is expected to generate $489,000 in additional annual sales. Costs are 46% of sales. The tax rate is 34%.

19)What is the Cash Flow From Assets for the last year of this project?

round to nearest dollar. enter the number with commas if necessary

1.1 A company with a cost of capital of 20% has identified projects with the following cash flows:

Required 1:

A. Calculate the NPV and IRR of each project.

Curtis industries is considering the purchase of a new machine. It will cost $80,000, last for 8 years, and have a residual value of $10,000. If purchased, the machine is expected to increase cash inflows by $80,000 per 8 years, with $64,000 per year for 8 years in additional cash outlays required to operate the machine. The company uses the straight-line method of depreciation, and desires a 12% minimum rate of return.

The present value factors of $1 due eight years from now:

8%              .540

10%            .467

12%            .404

14%            .351

The present value factors for an annuity of $1 per year due at the end of each of eight years:

8%             5.747

10%            5.335

12%            4.968

14%            4.639

Q#1. Determine the payback period.

Q#2. Determine the internal rate of return of this investment (to the nearest whole percentage)

Q#3. Determine the net present value of this investment at the desired minimum rate of return

Q#4. Determine the accounting rate of return of this investment.

THANK YOU!

Which of the following is characteristic of the traditional cost system?

a. Reliance on financial performance measures.

b. Many work in process account transactions.

c. Many process control points.

d. All of these choices are correct.

You are the manager of Colgate, and the demand and cost functions for Colgate enamel toothpaste are given by Q = 24-3P and C(Q) = 10 – 4Q + Q².

1. 1. Find the inverse demand function for Colgate toothpaste.
2. 2. Find the price and output that maximize profits.
3. 3. Compute Colgate profits.
4. 4. Explain the difference between the pricing strategy of the monopolistic competitive firm and the pricing strategy of the perfect competitive firm. Explain which firm benefits society more.

A firm is considering a project with a 5-year life and an initial cost of $1,000,000. The discount rate for the project is 10%. The firm expects to sell 2,500 units a year for the first 3 years. The after-tax cash flow per unit is $120. Beyond year 3, there is a 50% chance that sales will fall to 900 units a year for both years 4 and 5, and a 50% chance that sales will rise to 3,000 units a year, for both years 4 and 5. The firm will have the option to abandon the project after 3 years (i.e., at t=3) by selling it for $200,000 (after-taxes). You will know which state will be realized in years 4 and 5 (should the project be continued) by the time you have to make the potential abandonment decision at t=3. What is the net present value of this project given the sales forecasts and the abandonment option?

how does cost accounting affect the production of goods and rendering of services?