6. The president does not want to change the selling price. Instead, he wants to increase the sales commission by $1.50 per unit. Hethinks that this move, combined with some increase in advertising, would increase this year's unit sales by 25%. How much could thepresident increase this year's advertising expense and still earn the same $920,000 net operating income as last year? Feather Friends, Incorporated, distributes a high-quality wooden birdhouse that sells for $80 per unit. Variable expenses are $40.00per unit, and fixed expenses total $160,000 per year. Its operating results for last year were as follows:$ 2,160,0001,080,0001,080,000160,000$ 920,000SalesVariable expensesContribution marginFixed expensesNet operating income

Computation of New variable cost $40 + $1.5 $41.5 Increase in sale units $2160000 / $80 + 25% 33750…

Answered: 6. The president does not want to…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Digby's turnover rate for this year is 6.36%. This rate is projected to remain the same next year and no further downsizing will occur from automating. Digby plans to spend an additional $500 beyond the extra amount above the $1000 recruiting base it spent this year. The goal of this additional investment is to improve the quality of applicants. What would the total recruiting cost be for Digby next year? Select : 1 $186,185 $171,863 $157,541 $143,219
Allegience Insurance Company's management is considering an advertising program that would require an initial expenditure of $182,050 and bring in additional sales over the next five years. The projected additional sales revenue in year 1 is $85,000, with associated expenses of $30,000. The additional sales revenue and expenses from the advertising program are projected to increase by 10 percent each year. Allegience's tax rate is 30 percent. (Hint: The $182,050 advertising cost is an expense.) Use Appendix A for your reference. (Use appropriate factor(s) from the tables provided.) Required: 1. Compute the payback period for the advertising program. 2. Calculate the advertising program's net present value, assuming an after-tax hurdle rate of 10 percent. (Round your intermediate calculations and final answer to the nearest whole dollar.) 1. 2. > Answer is complete but not entirely correct. Payback period Net present value 3✔ years $ 49,209 X
Use the below tables to solve the problem.
Your firm is contemplating the purchase of a new $530, 000 computer - based order entry system. The system will be depreciated straight line to zero over its five-year life. It will be worth $50, 000 at the end of that time. You will save $310, 000 before taxes per year in order processing costs, and you will be able to reduce working capital by $65,000 (this is a one- time reduction). If the tax rate is 25 percent, what is the IRR for this project? -
A project will increase revenue from $3.6 million to $4.4 million. Wages are 30% of revenue. Maintenance on the machine will be $47,000 more than it is on the machine that will be replaced. What are the incremental expenses (i.e. change in combined wages and maintenance costs) that will result from accepting this project? (Hint: This is tricky. Read the question carefully to be sure you understand exactly what this question is asking for.) Question 5Answer a. $0.800 million b. $0.287 million c. $0.193 million d. $0.560 million
(Ignore income taxes in this problem.) Your Company has some equipment that can either be repaired right now for $50,000 or sold for $13,000 scrap value. As an alternative, Your Company could buy new equipment for $150,000. Both pieces of equipment would last 8 years. The annual operating expenses of the new equipment would be $8,500 less than the operating costs of the old machine. In addition, the new machine would be able to produce 100 more units that can be sold for a contribution margin of $65 per unit. The new equipment is expected to have a $10,000 salvage value in 8 years. Your Company discount rate is 8%. What is the net present value of the decision to buy the new equipment instead of repairing the old equipment? a $4,605 b $3,225 c $1,605 d ($ 795)
Cooper Industries wants to replace two small delivery trucks with one larger delivery truck. The old trucks are valued at $13,000 each. The new truck will cost $52,000. If Cooper’s controllable margin is $97,000 and their operating assets were valued at $580,000 before they bought the new truck, what will their new ROI be? A :17.5% B : 16.0% C : 15.3% D : 16.7%
Healthy Foods Inc is considering introducing a new line of dried flowers. The firm expects to be able to generate $ 4 million in revenues from this new line, each year for the next 10 years. Customers who come to buy the flowers often buy the firm’s traditional offerings (fresh fruit and baked goods) and it is anticipated that the revenues on these goods will increase from $ 14 million to $ 17 million as a consequence. The firm has a 40% pre-tax operating margin on all of its products. Assuming a 8-year life, a 10% cost of capital, a 40% tax rate and no salvage value or depreciation, what is the maximum that you would be willing to invest in this new product line?
Kinky Copies may buy a high-volume copier. The machine costs $130,000 and this cost can be fully depreciated immediately. Kinky anticipates that the machine actually can be sold in 5 years for $30,000. The machine will save $22,000 a year in labor costs as an after-tax reduction, but will require an increase in working capital, mainly paper supplies, of $11,000. The firm's marginal tax rate is 21%, and the discount rate is 6%. (Assume the net working capital will be recovered at the end of Year 5.) What is the NPV of this project? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 2 decimal places)
Suppose GM is considering expanding its operations to a new overseas market. The move will require $1,000,000,000 to build a new plant, sales center, and local sales team. The company estimates it can generate $175,000,000 in sales each year for the first 8 years, followed by sales of $250,000,000 per year for 3 years, after which it expects to generate revenues of $300,000,000 per year for 9 years. However, during each year operating costs (labor, equipment, etc), will be $20,000,000. In year 10, the firm will need to spend an additional $25,000,000 to update its facilities. If the firm's required rate of return is 17.25%, what is the net present value of the project? Round to the nearest $0.01. Hint: Draw a timeline with the appropriate net cash flows in each year.
. The Indiana Company has had a great year financially and they are wanting to better understand the amount of free cash flows that they have to invest back into the company. After having sales of $1 million, total costs of $500,000, interest expense of $50,000, depreciation of $100,000, and Capex of $90,000, what is the amount of free cash flow for the company? Assume a 35% tax rate and only use the information that is provided above. a. $220,000 b. $270,000 c. $237,500 d. $335,000 SOOK 50-100
Pm.4

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