The type of interest that is never deductible on schedule A is itemized deductions, is C) Personal interest paid on a car loan.
What goes into Schedule A ?Form 1040, the form used by U.S. taxpayers to report and pay their individual income tax, has an optional schedule called Schedule A.
A taxpayer can declare expenses for specific deductible goods, services, and contributions to the IRS in order to reduce his overall taxable income. Typical examples of this include prescription costs, mortgage payments, gifts to charities, and donations.
Only investment interest and home mortgage interest paid on a primary or secondary dwelling are tax deductible. Personal interest paid on a car loan is not allowed there.
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2. The text makes it look as if maximizing output is the goal of society.
a. Is maximizing output the goal of society?
b. If the country is a Christian country, should it be?
c. If not, what should it be? (Religious)
Explanation:
a) Maximizing output might not be the final goal of society, but it is a way of achieving a goal. Society can make a profit by maximizing output. Profit maximization is possible through output maximization. All of the individuals try to maximize their profit. Profit maximization can be done through output maximization. Profit maximization is the goal of a society.
Hence, maximizing output may not be the final goal of a society, but it is a way of achieving the final goal.
Sheffield Company uses a periodic inventory system. For April, when the company sold 560 units, the following information is available. Units Unit Cost Total Cost April 1 inventory 240 $27 $ 6,480 April 15 purchase 370 32 11,840 April 23 purchase 390 35 13,650 1,000 $31,970 Compute the April 30 inventory and the April cost of goods sold using the LIFO method.
Answer:
$19,090
Explanation:
LIFO assumes that the last units to arrive will be sold first. Therefore, the cost of goods sold will be based on later (recent) prices.
Therefore,
Cost of Sales = 390 units x $35 + 170 x $32 = $19,090
Henderson Company has fixed costs of $35,000 and a contribution margin ratio of 25%. If expected sales are $200,000, what is the margin of safety as a percent of sales
Answer:
30%
Explanation:
Workers in Transportation and Logistics careers who believe in the benefits of a union are most likely to work for
local, state, or federal governments.
nonprofit organizations that use unions.
companies that use self-employed contractors.
private companies and businesses.
HELP PLEASE
Answer:
A.) local, state, or federal governments.
Explanation:
Workers in Transportation and Logistics careers who believe in the benefits of a union are most likely to work for local, state, or federal governments. Thus, option A is correct.
What is Transportation?Transportation, the development of merchandise and people from one spot to another, and the different means by which such development is achieved.
Laborers in Transportation and Logistics vocations who have confidence in the advantages of an association are probably going to work for it. not-for-profit associations that utilize associations.
Laborers in operations vocations who put stock in the advantages of an association are probably going to work for neighborhood, state, or central legislatures.
Union have better work well-being securities and preferred paid leave over non-association laborers, and are safer practicing their freedoms in the workplace.
Therefore, option A is correct.
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John blodgett is the managing partner of a business that has just finished building a 60 room mote boldgett aticipates that he will rent these rooms for 15000 nights nesxt year all rooms are similar and will rent for the same price blodgett estimates the following operating costs for next year the capital invested in the motel is $900000 the paritnarship target return on investment is 25% blodgett expect demand for rooms to be uniform throughout the year he plans to price the rooms at full cost plus markup on full cost to earn the target return on invesment
Variable operating cost $5per room-nigh
Total fixed costs 375000
What price should blodgett charge room night ?what is the markup as percentage of the full requried cost of room might
Answer:
a. Price Blodgett should charge $45 (see below)
b. Markup percentage of the full cost of room night:
Markup = $15
Full Cost =$30
Therefore, percentage of markup to full cost = 15/30 * 100 = 50%
Explanation:
a) Costs Calculations:
Unit cost Total cost
Variable $5 $75,000 ($5 x 15,000)
Fixed Cost $25 $375,000 ($375,000/15,000)
Full Cost $30 $450,000 ($30 x 15,000, or $75,000 + $375,000)
Markup $15 $225,000 ($900,000 x 25% returns)
Price to charge $45 $675,000
answer the following questions, please
The cost reconciliation indicates a discrepancy, as the total costs assigned exceed the beginning work in process costs. This could be due to additional costs.
How did we arrive at this assertion?To prepare a production cost report for the Welding Department for the month of February, we need to calculate the following:
1. Equivalent units of production for materials, labor, and overhead.
2. Cost per equivalent unit for materials, labor, and overhead.
3. Total costs assigned to units transferred out and ending work in process.
4. Cost reconciliation.
Let's calculate each of these steps:
Step 1: Equivalent Units of Production
Equivalent units of production are calculated based on the percentage of completion for units in process.
For materials:
Beginning work in process: 15,000 units x 10% complete = 1,500 equivalent units
Units transferred in: 64,000 units
Ending work in process: 25,000 units x 20% complete = 5,000 equivalent units
Total equivalent units for materials: 1,500 + 64,000 + 5,000 = 70,500 equivalent units
For labor and overhead:
Since the given data does not provide the percentage of completion for labor and overhead, we assume it is the same as for materials. Therefore, the equivalent units for labor and overhead will also be 70,500 units.
Step 2: Cost per Equivalent Unit
To calculate the cost per equivalent unit, we divide the total costs by the total equivalent units.
Cost per equivalent unit for materials: $135,000 / 70,500 units = $1.91 per unit
Cost per equivalent unit for labor: $57,000 / 70,500 units = $0.81 per unit
Cost per equivalent unit for overhead: $35,100 / 70,500 units = $0.50 per unit
Step 3: Total Costs Assigned
To calculate the total costs assigned to units transferred out and ending work in process, we multiply the cost per equivalent unit by the equivalent units for each category.
For units transferred out:
Materials: 64,000 units x $1.91 per unit = $122,240
Labor: 64,000 units x $0.81 per unit = $51,840
Overhead: 64,000 units x $0.50 per unit = $32,000
For ending work in process:
Materials: 25,000 units x $1.91 per unit = $47,750
Labor: 25,000 units x $0.81 per unit = $20,250
Overhead: 25,000 units x $0.50 per unit = $12,500
Step 4: Cost Reconciliation
To reconcile the costs, we compare the total costs assigned to units transferred out and ending work in process with the beginning work in process costs.
Beginning work in process costs: $32,175
Total costs assigned to units transferred out: $122,240 + $51,840 + $32,000 = $206,080
Total costs assigned to ending work in process: $47,750 + $20,250 + $12,500 = $80,500
Total costs: $206,080 + $80,500 = $286,580
Since the total costs assigned exceed the beginning work in process costs, there may be some additional costs that need to be investigated or accounted for.
The production cost report for the Welding Department for the month of February is as follows:
------------------------------------------------------------------------
| | Equivalent Units | Cost per Equivalent Unit | Total Costs |
------------------------------------------------------------------------
| Materials | 70,500 | $1.91 | $135,000 |
| Labor | 70,500 | $0.81 | $57,000 |
| Overhead | 70,500 | $0.50 | $35, 100 |
------------------------------------------------------------------------
| Total (Transferred-out) | 64,000 | | $227,240 |
| Ending work in process | 25,000 | | $80,500 |
------------------------------------------------------------------------
| Total Costs $307,740 |
------------------------------------------------------------------------
Note that the cost reconciliation indicates a discrepancy, as the total costs assigned exceed the beginning work in process costs. This could be due to additional costs.
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What is the difference between pure competition and perfect competition in market structure?
provides the benchmark that can be use to evaluate markets while
Perfect competitionis a form of market in which there are a large number of buyers and sellers competing with each other in the purchase and sale of goods, respectively and no individual buyer or seller has any influence over the price.
hope this help!
Which one of these documents itemizes the closing costs and explains the terms of your loan?
Answer: Closing disclosure
Explanation:
Closing Disclosure is a form which gives the final details about the loan an economic entity has chosen. Closing disclosure is made up of the loan terms, the projected monthly payments, and also on how much the person will pay in fees and every other necessary costs in order for the person to get the closing costs.
Once the signed Closing disclosure has been received by the lender from the borrowers, then preparation on the loan documents begin.
A loan is a type of debt that a person or another organization takes on. The borrower receives a sum of money from the lender, which is typically a corporate or government.
The documents that itemizes the closing costs and explains the terms of your loan is "Closing Disclosure"
Closing Disclosure is a document that provides the last facts about the loan that a business has chosen. The loan conditions, expected monthly payments, as well as how much the person will spend in fees and other required expenditures in order to obtain the closing costs are all included in the closing disclosure. The loan documentation are prepared once the lender receives the signed Closing Disclosure from the borrowers.
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Reconcilling supply and demand has four overlapping activities, indicate these activites
To reconcile supply and demand, there are four overlapping activities. The four overlapping activities that help reconcile supply and demand are as follows:
Activity 1: Forecasting - The first step is forecasting, which entails predicting demand for goods and services. It is a quantitative process that includes data gathering, data cleansing, and mathematical modelling.
Activity 2: Planning - Planning is the second step. Planning involves identifying the resources needed to meet the anticipated demand, as well as allocating the available resources efficiently.
Activity 3: Execution - Execution is the third step. Execution entails efficiently managing the flow of goods and services from suppliers to customers, ensuring that the appropriate product and service is provided at the correct location, and ensuring that demand is satisfied.
Activity 4: Monitoring - Finally, the process includes monitoring the performance of the activities and the supply chain as a whole. It entails comparing actual performance to expected performance and identifying areas for improvement.
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Can Financial Markets help deploy renewables?
Answer:
in my opinion it can be yes
Explanation:
please mark me brainlist and follow
Beverly Mills has decided to lease a hybrid car to save on gasoline expenses and to do her part to help keep the environment clean. The car she selected is available from only one dealer in the local area, but that dealer has several leasing options to accom-modate a variety of driving patterns. All the leases are for 3 years and require no money at the time of signing the lease. The first option has a monthly cost of $330, a total mileage allowance of 36,000 miles (an average of 12,000 miles per year), and a cost of $0.35 per mile for any miles over 36,000. The following table summarizes each of the three lease
options:
(See photos below)
Beverly Mills has three leasing options to choose from. Each of these options differs in terms of the monthly cost, the total mileage allowance, and the cost for any miles over the set mileage allowance. Depending on her driving patterns, Beverly Mills can select the option that suits her the best.
Beverly Mills decided to lease a hybrid car to save on gasoline expenses and to do her part to help keep the environment clean. The car she selected is available from only one dealer in the local area, but that dealer has several leasing options to accommodate a variety of driving patterns.All the leases are for 3 years and require no money at the time of signing the lease.
The three lease options available to Beverly Mills are as follows:
Option 1:Monthly cost: $330Total mileage allowance: 36,000 miles (an average of 12,000 miles per year)Cost for any miles over 36,000: $0.35 per mile
Option 2:Monthly cost: $460Total mileage allowance: 45,000 miles (an average of 15,000 miles per year)Cost for any miles over 45,000: $0.45 per mile
Option 3:Monthly cost: $540Total mileage allowance: 60,000 miles (an average of 20,000 miles per year)Cost for any miles over 60,000: $0.55 per mile
Therefore, Beverly Mills has three leasing options to choose from. Each of these options differs in terms of the monthly cost, the total mileage allowance, and the cost for any miles over the set mileage allowance. Depending on her driving patterns, Beverly Mills can select the option that suits her the best.
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Prepare the Statement of Retained Earnings from the Adjusted Trial Balance and Income Statement. Within each section of the statement,
SMART TOUCH LEARNING
Adjusted Trial Balance
December 31, 2016
Account Title
Debit Credit
Cash 19500
Accounts recievable 10800
Office Supplies 200
Prepaid Rent 13,000
Furniture 22,800
Accumulated Depreciation--Furniture 7800
Accounts Payable 2600
Salaries Payable 600
Interest Payable 300
Unearned Revenue 6,500
Notes Payable 9,100
Common Stock 12,700
Retained Earnings 13,000
Dividends 33,100
Service Revenue 59,100
Depreciation Expense-Furniture 2600
Interest Expense 300
Rent Expense 3900
Salaries Expense 4500
Supplies Expense 1000
Total 111,700 111,700
SMART TOUCH LEARNING
Income Statement
Month Ended December 31, 2016 Balance
Revenue
Service revenue 59100
ExpensesDepreciation Expense-Furniture 2600
Interest Expense 300
Rent Expense 3900
Salaries Expense 4500
Supplies Expense 1000
Total expense 12300
Net income 46800
Answer:
Retained earnings, December 31, 2016 = 26,700
Explanation:
The Statement of Retained Earnings can be prepared as follows:
SMART TOUCH LEARNING
Statement of Retained Earnings
For the month ended December 31, 2016
Details Amount
Retained earnings, December 01, 2016 13,000
Net income for the month 46,800
Dividends (33,100)
Retained earnings, December 31, 2016 26,700
Note: No currency sign is used in the answer in order to avoid confusion because no currency is used in the question itself.
A common law rule that requires that the terms of the offeree’s acceptance adhere exactly to the terms of the offeror’s offer for a valid contract to be formed is called:
1. The Mirror-Image Rule.
2. A Quasi-Contract.
3. Quantum Meruit.
4. An Option Contract
Deposits of $1,530 each were received for advance tour reservations from 10 school groups. At November 30, all of these
deposits have been earned.
explain the topic 'market structure' in economics
Answer:
Market structure, in economics, refers to how different industries are classified and differentiated based on their degree and nature of competition for goods and services. It is based on the characteristics that influence the behavior and outcomes of companies working in a specific market.
Explanation:
I hope this helps, correct me if I am wrong :) DO NOT CLICK ON RANDOM LINKS AS THEY CONTAIN VIRUSES!
Answer:
Market structure refers to characteristics or properties of marketing economy.
They are mainly represented by curves such as monopolistic characteristics which comprises of perfect and imperfect Monopoly.
And oligopolistic factor.
Select the correct answer from each drop-down menu.
Fourteen-year old Eric wants to work during his school vacation. What time limits would apply to Eric on normal days to take up any work?
Eric may only work between
and
y during his school vacation,
In many countries, including United States, there are laws that regulate the employment of minors, including the hours that they are allowed to work.
What is employment?Employment refers to state of being employed or having a job, where an individual provides labor in exchange for a salary, wages, or other forms of compensation. It is a fundamental aspect of modern society and an essential means of survival for most people. Employment can take many forms, including full-time, part-time, temporary, or contract work. In addition, it can be self-employment, where an individual is their boss, or working for an organization or company. Employment provides individuals with financial stability, a sense of purpose, and an opportunity for personal and professional growth. It is crucial for economic growth and development, and governments worldwide prioritize creating jobs and reducing unemployment rates to ensure stability and prosperity.
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10. Which statement best describes angel investors?
O A. They provide funding for startup businesses.
OB. They're most interested in investing in businesses that are well-established.
C. They're bank loan officers who are responsible for funding startup businesses.
O D. They provide debt financing to a business by buying stock within the company.
The statement that best describes angel investors is: A. They provide funding for startup businesses.
What is angel investor?Angel investor can be defined as the person that tend to provide capital for those that want to startup a business but does not have fund to startup the business.
This investors mostly invest in small scale business owners who have business plan but are uncapable to start the business due to lack of fund which is why most small business owners do go to this investors because they know that they are going to get startup fund for their business.
Therefore the correct option is A.
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What did Ray Kroc feel about churches and courthouses?
He advertised, "In business for yourself, but not by yourself." His idea was founded on the simple principle of a three-legged stool, with one leg representing McDonald's franchisees, the second representing McDonald's suppliers, and the third representing McDonald's employees.
The McDonald brothers were more concerned about product quality and consumer satisfaction. Ray was more interested with making money by rapidly expanding the business. As a result, they had disputes, and their phone conversations were brief. Throughout the creation of the McDonald empire, Kroc faced numerous hurdles, including improper franchisees, high electrical costs due to ice cream, difficult debates and arguments with his partners, financial troubles, and divorce.
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A company pays it's workers 20$ a day .
Is it a fixed cost or variable cost ??
Answer:
Examples of variable costs are sales commissions, direct costs, cost of materials used in production, and utility costs. ૮(0w0)
Explanation:
Fixed costs remain the same, whether production increases or decreases. Wages paid to workers for their regular hours are a fixed cost. Any extra time they spend on the job is a variable cost. In a factory that makes dresses, the variable costs are the fabric and the used to make the dresses.
why do we have to consider the risks before we invest?
answer:
your investment value might rise or fall because of market conditions, therefore it is always a smart to consider the risks in investing before you invest. if the risk is huge, then you might not want to invest due to the fear of losing your money.
explanation:
in finance, risk refers to the degree of uncertainty and/or potential financial loss inherent in an investment decisionin general, as investment risks rise, investors seek higher returns to compensate themselves for taking such risksevery saving and investment product has different risks and returns4. Suppose GDP is $15 million, private saving is $3 million, consumption is $8 million, public saving is $2 million. Assume the economy is closed.
(a) Calculate taxes minus transfer payments (T), government purchases (G), national saving (S), and investment (I).
(b) Is the government running a deficit or a surplus.? Explain
Which one of the following is not an example of collaborators? O Public relations companies O Customers O Savings and loans O Marketing research firms
The Savings and loans are not an example of collaborators. Option B
What are collaboratorsCollaborators typically refer to individuals, groups, or entities that work together or cooperate on a project, initiative, or business endeavor. They often have some shared goals, interests, or responsibilities. Let's break down the other options to understand how they fit the concept of collaborators:
Public relations companies: These companies help businesses manage their public image and communications. They collaborate with businesses to shape their messaging, handle media relations, and enhance their reputation.
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Although all could potentially act as collaborators, Savings and Loans, being primarily financial institutions, are less commonly associated with the role of collaborators.
Explanation:In the context of business and organizational collaboration, the options provided - Public relations companies, Customers, Savings and loans, and Marketing research firms, all can be considered as potential collaborators. However, if we focus on the most traditional definition, savings and loans, which generally refers to specific financial institutions, might be less associated with the role of collaborators in a standard business scenario. Unlike public relations companies, customers, and marketing research firms, savings and loans are primarily engaged in the sphere of financial transactions rather than collaborations for business strategy or product/service development.
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Julie evaluated her spending and found that she was spending about $75 more per month on transportation than she has bodgeted She can transfer money from other categories to increase transportation budget to $250 per month If her total monthly income S1,900 , to the nearest percent, what percent of her monthly income will be budgeted for transportation
Answer:
Julie
The percent of her monthly income that will be budgeted for transportation is:
= 13%.
Explanation:
a) Data and Calculations:
Amount budgeted for transportation = $175
Amount being spent on transportation = $250
Total monthly income = $1,900
Percentage of monthly income that will be budgeted for transportation = $250/$1,900 * 100
= 13.16%
= 13.2%
= 13%
Percentage of monthly income earlier budgeted for transportation = 9% ($175/$1,900 * 100)
The additional spending on transportation represents 4% ($75/$1,900 * 100)
New percentage spending on transportation = 13% (9% + 4%)
Question 4 (2 points) Which component of the policyholder's coverage is most expensive? Their uninsured motor vehicle coverage Their medical payments coverage Their liability coverage Their collision coverage
Their medical payments coverage
Is anyone good at introduction to business?
Answer:
Yeah I'm good with business too
Explanation:
Step 2. Search to find any summary about the company that mentions funds for starting the business. Try to find any information containing employee data in this section.
Step 3. Find the section where the product or service is detailed. Look to see what kinds of products or services will be involved with the business. Compare this with what other similar business plans are offering.
Record the information you found for steps 2 and 3. Make sure you discuss how the company got money to start the business, employee data, and what products or services the company provides in comparison with what other similar business plans are offering.
We can see here that such company gotten after searching for company that mentions funds for starting the business is Go-o-gle.
Funds for starting the business: $1 million in funding from Andy Bechtolsheim.
Employee data: over 160,000 employees worldwide.
What is a company?A company is a legal and organizational entity formed by individuals or a group of individuals with the purpose of conducting business activities. It is an association of individuals who come together to engage in commercial, industrial, or professional activities in order to generate revenue and make a profit.
Their products are digital and online services.
Comparing this company, we see Microsoft.
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Your friend Stan owns a coffee shop in a monopolistically competitive industry. One day, Stan tells you (an economist) that he is earning an economic profit and is setting his price equal to his marginal cost. Is Stan producing the profit-maximizing amount of coffee? What should he do?
In a monopolistically competitive industry, each firm has some control over the price it sets due to product differentiation.
Stan mentioned that he is earning an economic profit and setting his price equal to his marginal cost. To determine whether he is producing the profit-maximizing amount of coffee, we need to consider a few factors.
1. First, let's understand the relationship between price, marginal cost, and profit maximization. In a competitive market, profit maximization occurs where marginal cost equals marginal revenue. However, in monopolistic competition, firms have some market power, so the profit-maximizing quantity occurs where marginal cost equals marginal revenue, not price.
2. Setting the price equal to marginal cost does not necessarily guarantee profit maximization. If Stan's price is equal to marginal cost, it means that he is covering his variable costs, but it does not take into account his fixed costs. To maximize profit, Stan should set his price above marginal cost, considering both variable and fixed costs.
3. If Stan is currently earning an economic profit, it suggests that he may not be producing the profit-maximizing amount of coffee. In monopolistic competition, firms tend to have excess capacity, meaning they produce less than the quantity that would minimize average total cost. By increasing his output, Stan may be able to reduce his costs and increase his profit.
Considering these factors, here are a few suggestions for Stan:
- Conduct a cost analysis: Stan should evaluate his fixed and variable costs to understand the full picture of his expenses. By knowing his costs, he can set a more informed price and determine the profit-maximizing quantity.
- Consider demand elasticity: Stan should also assess the price elasticity of demand for his coffee. If demand is relatively elastic, a small price increase may result in a significant decrease in quantity demanded, potentially reducing his profits. On the other hand, if demand is inelastic, Stan may be able to increase his price without a significant drop in sales.
- Experiment with pricing: Stan could consider experimenting with different prices to find the optimal point that maximizes his profit. By monitoring customer response to different prices, he can identify the price that generates the most revenue while covering his costs.
By taking these steps and considering the unique characteristics of monopolistic competition, Stan can better position his coffee shop for long-term success and profitability.
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Match the drawbacks of the scientific management theory to their respective outcomes in the workplace.
rigidity
lack of autonomy
mechanical nature
lack of feedback
Answer:
Explanation:
Plato Users
Production methods are standardized with no opportunity for individual initiative is known as lack of autonomy.
What are Production methods?A production process is a way to use economic resources, such as labor, expensive machinery, or land, to create goods and services for customers.
The manufacturing process typically addresses how to effectively and productively produce goods for sale so that clients can receive them fast without compromising the product's quality.
Depending on their manufacturing objectives, production volumes, and technology tools or software systems, organizations can use a wide range of production methods.
Making broad-based production decisions that have an impact on the productivity levels of product development and sales is a crucial component of the job of a manufacturing manager. Choosing the best production method frequently depends on the kind of technology you have access to.
For instance, without the right technology to track, categorize, or manufacture these products appropriately, you might not be able to adhere to a clear mass production structure if you receive a lot of orders for the same product.
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Suppose a firm manager has a base salary of $175,000 and earns 0.5 percent of all profits. Determine the manager's income if revenues are $10,000,000 and profits are $5,000,000. A) $150,000 B) $200,000 C) $225,000 D) $300,000
The manager's income is $200,000.
The option (B) is correct.
The expression "income" for the most part alludes to how much cash, property, and different exchanges of significant worth got over a set timeframe in return for administrations or items. There is no single, standard definition: pay is characterized by the setting in which the idea is utilized.
Income includes monetary as well as non-financial upsides of recompenses and perquisites. All pay is available under personal expense except if explicitly excluded.
Given;
Fixed salary = $175,000
Earns 0.5% of all profits
Profit = $5,000,000
Manager income = Fixed salary + 0.005 * Profit
Manager's income = $175,000 + 0.005 * $5,000,000
=> Manager's income = $175,000 + $25000
=> Manager' income = $200,000
Thus, the manager's income is $200,000.
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Harlow Appliance has just developed a new air fryer it believes will have broad market appeal. The company has performed marketing and cost studies that revealed the below information:
Based on the positive NPV of $419,910, I would recommend that Harlow accept the device as a new product.
Net cash inflow for each year:Year Sales in units Sales Revenue Variable Costs Contribution Margin Fixed Expenses Net Cash Inflow
1 6,000 $420,000 $240,000 $180,000 $130,000 $50,000
2 9,000 $630,000 $360,000 $270,000 $130,000 $140,000
3 10,000 $700,000 $400,000 $300,000 $130,000 $170,000
4 12,000 $840,000 $480,000 $360,000 $130,000 $230,000
5 9,000 $630,000 $360,000 $270,000 $130,000 $140,000
6 7,000 $490,000 $280,000 $210,000 $130,000 $80,000
Step 2/5
b. Based on the positive NPV of $419,910, I would recommend that Harlow accept the device as a new product. The NPV indicates that the project is expected to generate more cash inflows than outflows, providing a return higher than the required rate of return of 10%.
Step 3/5
3.
a. NPV calculation with a required rate of return of 12%:
Year Net Cash Inflow Present Value Factor (12%) Present Value
1 $50,000 0.893 $44,650
2 $140,000 0.797 $111,940
3 $170,000 0.712 $121,040
4 $230,000 0.636 $146,280
5 $140,000 0.567 $79,380
6 $80,000 0.507 $40,560
NPV = Present Value of Net Cash Inflows - Initial Investment
= ($543,850 - $157,500)
= $386,350
Step 4/5
b. Based on the positive NPV of $386,350, I would still recommend that Harlow accept the device as a new product even with a higher required rate of return of 12%. The project is still expected to generate more cash inflows than outflows, providing a return higher than the required rate of return.
Step 5/5
4. The general observation is that as the required rate of return increases from 10% to 12%, the NPV decreases from $419,910 to $386,350.
This suggests that the higher the required rate of return, the lower the expected return on investment for the project, which may reduce the project's attractiveness.
However, the project still generates a positive NPV at both
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Harlow Appliance has just developed a new air fryer it believes will have broad market appeal. The company has performed marketing and cost studies that revealed the below information:
A. New equipment would have to be acquired to produce the air fryer. The equipment would cost $157,500 and have a six-year useful life. After six years, it would have a salvage value of $7,500.
B. Sales in units over the next six years are projected to be as follows:
YEAR
SALES IN UNITS
1
4,500
2
6,000
3
7,000
4-6
10,000
C. Production and sales of the air fryer would require working capital of $30,000 to finance accounts receivable, inventories, and day-to-day cash needs. This working capital would be released at the end of the project’s life.
D. The air fryer would sell for $70 each; variable costs for production, administration, and sales would be $40 per unit.
E. Fixed costs for salaries, maintenance, property taxes, insurance, and straight-line depreciation on the equipment would total $100,000 per year. (Depreciation is based on cost less salvage value.)
F. To gain rapid entry into the market, the company would have to advertise and the costs would be:
YEAR
ANNUAL ADVERTISING ($)
1-2
$135,000
3
$112,500
4-6
$90,000
G. The company’s required rate of return is 10%.
Requirements
Based on the above details, please complete the below requirements for a total grade of 60 marks (5%).
1. Compute the net cash inflow (incremental contribution margin minus incremental fixed expenses) anticipated from sale of the device for each year over the next six years. (20 marks)
2. Using the data computed in (1) above and other data provided in the case,
(a) determine the net present value of the proposed investment rounding present value factors to three decimal places and amounts to whole dollars. (18 marks)
(b) Would you recommend that Harlow accept the device as a new product? Why? (2 marks)
3. Assuming instead that the required rate of return is 12% rather than 10%,
(a) determine the net present value of the proposed investment rounding present value factors to three decimal places and amounts to whole dollars. (15 marks)
(b) Would you recommend that Harlow accept the device as a new product? Why? (2 marks)
4. When comparing parts 2 and 3, what general observation do you notice? (1 mark)