considering producing toy action figures and sandbox toys. The products require different spec residual value. The two products have different patterns of predicted net cash inflows. iew - X Data table toy scre a, the Year Year 1.... Year 2...... Year 3.. Year 4.... Year 5.. Annual Net Cash Inflows Toy action figure Sandbox toy project project $ $ 321,225 $ 530,000 321,225 340,000 321,225 325,000 321,225 270,000 321,225 50,000 1,606,125 $ 1,515,000 Total Toy World will consider making capital investments only if the payback period of the project is less than 3.5 years and the ARR exceeds 8%. ARR 5. Ent

considering producing toy action figures and sandbox toys. The products require different spec residual value. The two products have different patterns of predicted net cash inflows. iew - X Data table toy scre a, the Year Year 1.... Year 2...... Year 3.. Year 4.... Year 5.. Annual Net Cash Inflows Toy action figure Sandbox toy project project $ $ 321,225 $ 530,000 321,225 340,000 321,225 325,000 321,225 270,000 321,225 50,000 1,606,125 $ 1,515,000 Total Toy World will consider making capital investments only if the payback period of the project is less than 3.5 years and the ARR exceeds 8%. ARR 5. Ent

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter19: Capital Investment

Section: Chapter Questions

Problem 15E: Gina Ripley, president of Dearing Company, is considering the purchase of a computer-aided...

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Toy Time Products is considering producing toy action figures and sandbox toys. The products require different specialized machines, each costing $1 million. Each machine has a five-year life and zero residual value. The two products have different patterns of predicted net cash inflows. (Click the icon to view the data.) Calculate the sandbox toy project's ARR. If the sandbox toy project had a residual value of $225,000, would the ARR change? Explain and recalculate if necessary. Does this investment pass Toy Time's ARR screening rule? First, enter the formula, then compute the ARR of the sandbox toy project. (Enter amounts in dollars, not millions. Enter your answer as a percent rounded to two decimal places.) Accounting = rate of return Get more help. ÷ Data table Annual Net Cash Inflows Toy action figure Sandbox toy project project Year Year 1. Year 2. Year 3. Year 4. Year 5.. Total Toy Time will consider making capital investments only if the payback period of the project is less…
Toyland Products is considering producing toy action figures and sandbox toys. The products require different specialized machines, each costing $1 million. Each machine has a five-year life and zero residual value. The two products have different patterns of predicted net cash inflows. (Click the icon to view the data.) Calculate the toy action figure project's ARR. If the toy action figure project had a residual value of $175,000, would the ARR change? Explain and recalculate if necessary. Does this investment pass Toyland's ARR screening rule? First, enter the formula, then compute the ARR of the toy action figure project. (Enter amounts in dollars, not millions. Enter your answer as a percent rounded to two decimal places.) Accounting Average annual operating income from asset Initial investment rate of return %
Play Products is considering producing toy action figures and sandbox toys. The products require different specialized machines, each costing $1.4million. Each machine has a five-year life and zero residual value. The two products have different patterns of predicted net cash inflows: Play will consider making capital investments only if the payback period of the project is less than 3.5 years and the ARR exceeds 8%. Annual Net CashAnnual Inflows Year Toy action figure project Sandbox toy project Year 1. . . . . . . . . . . $305,450 $550,000 Year 2. . . . . . . . . . . 305,450 350,000 Year 3. . . . . . . . . . . 305,450 310,000 Year 4. . . . . . . . . . . 305,450 270,000 Year 5. . . . . . . . . . . 305,450 25,000 Total $1,527,250 $1,505,000 Calculate the toy action figure project's payback period. If the toy action figure project had a residual value of $150,000,would the payback period change? Explain and…
Two new software projects are proposed to a young, start-up company. The Delta project will cost $150,000 to develop and is expected to have annual net cash flow of $40,000. The Echo project will cost $200,000 to develop and is expected to have annual net cash flow of $50,000. The company is very concerned about their cash flow. Using the payback period, which project is better from a cash flow standpoint? Why? Present the payback period for each project. Use this formula: Payback period = Investment/Annual Savings
LLL Products is considering producing toy action figures and sandbox toys. The products require different specialized machines, each costing $1 million. Each machine has a five-year life and zero residual value. The two products have different patterns of predicted net cash inflows: Annual Net Cash Inflows Year Toy action figure project Sandbox toy project Year 1. . . . . . . . . . . $428,750 $520,000 Year 2. . . . . . . . . . . 428,750 390,000 Year 3. . . . . . . . . . . 428,750 300,000 Year 4. . . . . . . . . . . 428,750 280,000 Year 5. . . . . . . . . . . 428,750 50,000 Total $2,143,750 $1,540,000 LLL will consider making capital investments only if the payback period of the project is less than 3.5 years and the ARR exceeds 8%. Calculate the sandbox toy project's payback period. If the sandbox toy project had a residual value of $225,000, would the payback period change? Explain and recalculate if…
Bicol Hardware Inc is considering two alternative strategies for a new power tool.According to Jun Ramos who is introducing the power tool, the new product will requirean outlay of P30,000 with a low price strategy. The product will generate cash proceedsof P20,000 per year and will have a life to two years. With a high price strategy, theproduct will generate cash proceeds of P36,000 but will have a life of only one year. Thecost of money for the company is 10%. Determine the net present value of the high pricestrategy.ANSWER: P32,727.27
The management of Penfold Corporation is considering the purchase of a machine that would cost $390,000, would last for 7 years, and would have no salvage value. The machine would reduce labor and other costs by $74,000 per year. The company requires a minimum pretax return of 12% on all investment projects. Click here to view Exhibit 7B-1 and Exhibit 7B-2 to determine the appropriate discount factor(s) using the tables provided. The net present value of the proposed project is closest to (Ignore income taxes.): (Round your intermediate calculations and final answer to the nearest whole dollar amount.)
Caine Bottling Corporation is considering the purchase of a new bottling machine. The machine would cost $193,900 and has an estimated useful life of 8 years with zero salvage value. Management estimates that the new bottling machine will provide net annual cash flows of $30,600. Management also believes that the new bottling machine will save the company money because it is expected to be more reliable than other rpachines, and thus will reduce downtime. Assume a discount rate of 7%. Click here to view the factor table. Calculate the net present value. (If the net present value is negative, use either a negative sign preceding the number eg-45 or parentheses eg (45). For calculation purposes, use 5 decimal places as displayed in the factor table provided. Round present value answer to 0 decimal places, eg. 125) Net present value $ How much would the reduction in downtime have to be worth in order for the project to be acceptable? (Round answer to 0 decimal places, e.g. 125.)
Toy World Products is considering producing toy action figures and sandbox toys. The products require different specialized machines, each costing $1.1 million. Each machine has a five-year life and zero residual value. The two products have different patterns of predicted net cash inflows. Annual Net Cash Inflows Year Toy action figure project Sandbox toy project Year 1. . . . . . . . . . . $327,000 $500,000 Year 2. . . . . . . . . . . 327,000 350,000 Year 3. . . . . . . . . . . 327,000 300,000 Year 4. . . . . . . . . . . 327,000 275,000 Year 5. . . . . . . . . . . 327,000 40,000 Total $1,635,000 $1,465,000 Toy World will consider making capital investments only if the payback period of the project is less than 3.5 years and the ARR exceeds 8%. Calculate the toy action figure project's ARR. If the toy action figure project had a residual value of $200,000, would the ARR change? Explain and recalculate if…
Two new software projects are proposed to a young, start-up company. The Alpha project will cost $150,000 to develop and is expected to have annual net cash flow of $40,000. The Beta project will cost $200,000 to develop and is expected to have annual net cash flow of $50,000. The company is very concerned about their cash flow. Using the payback period, which project is better from a cash flow standpoint ? Why?
Mellon Bank wants to experiment by adding a robot drive through at a cost of $226,000. The robot is expected to have a four year life and be sold for $76,000 at the end of its useful life. The belt is expected to lower labor by 180,000 each year as well as increase maintenance by 12,000 each year. Their working capital is not expected to change much. The required rate of return is 7%. What is the net present value of this investment?
The management of Kunkel Company is considering the purchase of a $34,000 machine that would reduce operating costs by $9,000 per year. At the end of the machine's five-year useful life, it will have zero scrap value. The company's required rate of return is 12%. Use Excel or a financial calculator to solve. Required: 1. Determine the net present value of the investment in the machine. (Any cash outflows should be indicated by a minus sign. Round answers to the nearest dollar.) Net present value 2. What is the difference between the total, undiscounted cash inflows and cash outflows over the entire life of the machine? (Any cash outflows should be indicated by a minus sign.) Total Cash Item Cash Flow Years Flows Annual cost savings Initial investment 1 Net cash flow %24 24