Capitalisation method Barak & Co. expects an average net profit of RO 40,000per year in the future. The average capital employed inthe business is RO 250,000. The normal rate of return.on capital employed in a similar business is 12%.Calculate the goodwill of the firm using:I. Super Profit Method (on the basis of three-yearpurchase).2. Capitalization Method.

Explanation of Goodwill:Goodwill is an intangible asset that represents the value of a business…

Answered: Barak & Co. expects an average net…

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 4EA: Assume a company is going to make an investment of $450,000 in a machine and the following are the...

See similar textbooks

Similar questions

Help please
A company has two investment possibilities, with the following cash inflows: If the firm can earn 7 percent in other investments, what is the present value of investments A and B? If each investment costs $4,000, is the present value of each investment greater than the cost of the investment?
A firm has the following investment alternatives (refer to image): Each investment costs $3,000; investments B and C are mutually exclusive, and the firm’s cost of capital is 8 percent. a.) What is the net present value of each investment? b.) According to the net present values, which investment(s) should the firm make? Why? c.) What is the internal rate of return on each investment?
Calculate the following from the information given Fego Ltd:1. Payback Period (expressed in years, months and days).2. Accounting Rate of Return on initial investment (expressed to two decimal places).3. Internal Rate of Return (expressed to two decimal places) if the net cash inflows are R400 000 per year for five years. Your answer must include two net present value calculations (using consecutive rates/percentages) and interpolation.
Roopali is considering an investment proposal with the following cash flows: Initial investment-depreciable assets $45,000 Initial investment-working capital 5,000 Net cash inflows from operations (per year for 7 years) 10,000 Disinvestment-depreciable assets 3,000 Disinvestment-working capital 2,000 Determine the payback period. Round to one decimal place. Determine the accounting rate of return on initial investment. round to three decimal places. Determine the accounting rate of return on average investment
Which of the following two companies creates more value, assuming that they are making the same initial investment? Company A's projected profits Year Last year 1 (forthcoming year) 2 3 4 Profit (£000s) 1,000 1,000 1,100 1,200 1,400 1,600 1,800 5 6 and all subsequent years Company B's projected profits Profit (£000s) Year Last year 1 (forthcoming year) 2 3 4 5 6 and all subsequent years 1,000 1,000 1,080 1,160 1,350 1,500 1,700 Profits for both companies are 20% of sales in each year. With company A, for every £1 increase in sales 7p has to be devoted to additional debtors because of the generous credit terms granted to customers. For B, only 1p is needed for additional investment in debtors for every £1 increase in sales. Higher sales also mean greater inventory levels at each firm. This is 6p and 2p for every extra £1 in sales for A and B respectively. Apart from the debtor and inventory adjustments, the profit figures of both firms reflect their cash flows. The cost of capital for…
Please give me answer general accounting
A project capitalized for P 50,000 in depreciable assets will earn a uniform annual income of P 19,849 in 10 yrs. The costs for operation and maintenance total P 9,000 each year. If the company expects its capital to earn 12% before income taxes, is the investment worthwhile? Use ROR, annual worth and present worth methods in justifying the investment.
The Fleming Manufacturing Company is considering a new investment. Financial projections for the investment are tabulated below. The corporate tax rate is 25 percent. Assume all sales revenue is received in cash, all operating costs and income taxes are paid in cash, and all cash flows occur at the end of the year. All net working capital is recovered at the end of the project. Investment Sales revenue Operating costs Depreciation Net working capital spending Net income Cash flow $ Year 1 NPV 3,975 $ $ Year 0 Year O 34,000 $ 400 a. Compute the incremental net income of the investment for each year. (Do not round intermediate calculations.) Year 1 $ 17,500 3,700 8,500 450 Year 2 4,275 $ Year 1 5,300 $18,000 Year 2 Year 3 b. Compute the incremental cash flows of the investment for each year. (Do not round intermediate calculations. A negative answer should be indicated by a minus sign.) Year 3 4,575 $ Year 2 3,800 3,900 8,500 8,500 500 400 $18,500 $15,500 3,100 8,500 ? Year 4 Year 4…
You are evaluating a prospective LBO investment and determine that the Year 5 free cash flow (FCF) estimate is $850 million. Additionally, based on related work you estimate that the appropriate discount rate is 8.5% and the long term growth rate is 3.5%. Based on the perpetuity growth method, the Terminal Value of the company is _________ in Year Group of answer choices a. $17.6 bn, year 5 b. $17.0 bn, year 6 c. $10.0 bn, year 5 d. $17.6 bn, year 6
Beyer Company is considering the purchase of an asset for $205,000. It is expected to produce the following net cash flows. The cash flows occur evenly within each year. Assume that Beyer requires a 9% return on its investments. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) Year 1 Year 2 Year 3 Year 4 Year 5 Total Net cash flows $ 74,000 $ 59,000 $ 100,000 $ 166,000 $ 54,000 $ 453,000 a. Compute the net present value of this investment.b. Should Beyer accept the investment? Compute the net present value of this investment. (Round your answers to the nearest whole dollar.)
An investment of $83 generates after-tax cash flows of $50.00 in Year 1, $72.00 in Year 2, and $125.00 in Year 3. The required rate of return is 20 percent. Find the net present value. Which of the following is not an operating activity? a. Cash receipts for interest earned. b. Cash payments for operating expenses. c. Cash collections from credit customers. d. Cash payments for dividends to shareholders. Want answer with explanation. If u give me wrong answer I will give u down vote.

SEE MORE QUESTIONS

Recommended textbooks for you

Principles of Accounting Volume 2

Accounting

ISBN:

9781947172609

Author:

OpenStax

Publisher:

OpenStax College

Intermediate Financial Management (MindTap Course…

Finance

ISBN:

9781337395083

Author:

Eugene F. Brigham, Phillip R. Daves

Publisher:

Cengage Learning

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Principles of Accounting Volume 2

Accounting

ISBN:

9781947172609

Author:

OpenStax

Publisher:

OpenStax College

Intermediate Financial Management (MindTap Course…

Finance

ISBN:

9781337395083

Author:

Eugene F. Brigham, Phillip R. Daves

Publisher:

Cengage Learning

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

SEE MORE TEXTBOOKS