Case Study 3 Constructed Response Answer Hocus Pocus Company wants to increase sales by adding a new product line. The company is considering three different projects. However, its capital budget is limited to $1,500,000. In addition, the company requires a rate of return of 10%. The information concerning the three product lines is given below. Net Initial Investment Budgeted Income Statement for the next five years: Sales Cost of Goods Sold Gross Margin Marketing and Administrative Expenses Net Income Broomsticks $1,170,000 $500,000 80,000 420,000 100,000 ? Magic Wands $983,000 *Assume all amounts stated on the budgeted income statement are cash items. $450,000 50,000 400,000 130,000 ? Crystal Balls $2,210,000 Required a) Determine the net present value for each project assuming all cash flows cease after five years. $650,000 32,000 618,000 22,000 ?

Case Study 3 Constructed Response Answer Hocus Pocus Company wants to increase sales by adding a new product line. The company is considering three different projects. However, its capital budget is limited to $1,500,000. In addition, the company requires a rate of return of 10%. The information concerning the three product lines is given below. Net Initial Investment Budgeted Income Statement for the next five years: Sales Cost of Goods Sold Gross Margin Marketing and Administrative Expenses Net Income Broomsticks $1,170,000 $500,000 80,000 420,000 100,000 ? Magic Wands $983,000 *Assume all amounts stated on the budgeted income statement are cash items. $450,000 50,000 400,000 130,000 ? Crystal Balls $2,210,000 Required a) Determine the net present value for each project assuming all cash flows cease after five years. $650,000 32,000 618,000 22,000 ?

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Problem 2 The manager of the Spartan Land Restaurant is developing the operating budget for next vear using the following financial information from the current year: Current Year's Next Year's Percentage Increase (Decrease) Next Year's Amount ($) Item Amount Food revenue 00$973,000 4% $112,500 2% Beverage revenue Food cost 000. 36% 1% Beverage cost Labor (including benefits) Other operating costs 23% d ate (1%) $298,000 (2%) 16% same Encar Fixed costs $70,000 same a. What is the current year's budgeted profit (loss)? b. Develop next year's budget: indicate the profit (loss).
Differential Analysis Report for Sales Promotion Proposal Rocket Shoe Company is planning a one-month campaiqn for August to promote sales of one of its two shoe products. A total of $176,000 has been budgeted for advertising, contests, redeemable coupons, and other promotional activities. The following data have been assembled for their possible usefulness in deciding which of the products to select f the campaign. Cross-Trainer Running Shoe Shoe Unit selling price $59 $65 Unit production costs: Direct materials $ (10) $(14) Direct labor (4) (5) Variable factory overhead (2) (4) Fixed factory overhead (6) (6) Total unit production costs $(22) $(29) Unit variable selling expenses (18) (17) Unit fixed selling expenses (10) (7) Total unit costs $(50) $(53) Operating income per unit $ 9 $ 12 No increase in facilities would be necessary to produce and sell the increased output. It is anticipated that 28,000 additional units of cross-trainer shoes or 23,000 additional units of running shoes…
Tips ips Project Cash Flow The financial staff of Cairn Communications has identified the following information for the first year of the roll-out of its new proposed service: Projected sales Operating costs (not including depreciation) Depreciation $24 million $11 million $4 million Interest expense $5 million The company faces a 25% tax rate. What is the project's operating cash flow for the first year (t = 1)? Enter your answer in dollars. For example, an answer of $1.2 million should be entered as $1,200,000. Round your answer to the nearest dollar.
Question 14 ( If the budget for your hotel had 100 rooms, open 300 days a year, with 50% occupancy and an ADR of $80, fixed costs of $750,000 and with a marginal cost per room of $17.50 then a) What would be your budgeted sales revenue. b) If your actual sales revenue was $1,5000,000 what would be the variance in % c) If your ADR as actually $85 would the variance be positive or negative d) If your actual marginal cost was $17.25 would the variance be positive or negative? e) If you actually sold 155,000 rooms would the variance be positive or negative
1. Prepare a differential analysis as of June 19 to determine whether to promote tennis shoes (Alternative 1) or walking shoes (Alternative 2). If an amount is zero, enter "0". Use a minus sign to indicate costs. If required, use a minus sign to indicate a loss. Differential Analysis Promote Tennis Shoes (Alt. 1) or Promote Walking Shoes (Alt. 2) June 19 Promote Promote Differential Tennis Shoes Walking Shoes (Alternative 1) (Alternative 2) (Alternative 2) Effects Revenues $4 Costs: Direct materials Direct labor Variable factory overhead Variable selling expenses Sales promotion Profit (loss)
Vd Sub: accounting
am. 40.
Current Attempt in Progress Sandhill's, Inc. has provided you with the following financial information: Budgeted Actual Sales Quantity 8,100 8,300 Sales price per unit $6.50 $6.25 Variable product cost per unit 2.50 2.75 Selling expense (fixed) 5,100 8,100 Administrative expense (fixed) 17,100 16,100 Income tax expense 3,900 4,100 Prepare a flexible budget. SANDHILL'S, INC. Flexible Budget Sales Revenue
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Required: 1. Prepare a differential analysis as of June 19 to determine whether to promote tennis shoes (Alternative 1) or walking shoes (Alternative 2). If an amount is zero, enter "0". Use a minus sign to indicate costs. If required, use a minus sign to indicate a loss. Differential Analysis Promote Tennis Shoes (Alt. 1) or Promote Walking Shoes (Alt. 2) June 19 Promote Promote Differential Walking Shoes (Alternative 1) (Alternative 2) (Alternative 2) Tennis Shoes Effects Revenues Costs: Direct materials Direct labor Variable factory overhead Variable selling expenses Sales promotion Profit (loss) $ 2. Determine whether to promote tennis shoes (Alternative 1) or walking shoes (Alternative 2). 3. The sales manager had tentatively decided to promote walking shoes, estimating that operating income would be increased by $153,000 ($14 operating income per unit for 24,000 units, less promotion expenses of $183,000). The manager also believed that the selection of tennis shoes would reduce…
Capital Budgets Rambus Inc. would like to purchase a production machine for $325,000. The machine is expected to have a life of three years, and a salvage value of $50,000. Annual maintenance costs will total $12,500. Annual savings are predicted to be $112,500. The company's required rate of return is 12%. Factors: Present Value of $1 (r = 12%)Year 0 1.0000 Year 1 0.8929 Year 2 0.7972 Year 3 0.7118 Required: (1) Using the Present Value Factors for $1, calculate the net present value of this investment (ignoring taxes). (2) Based on your answer in requirement 1, should Rambus purchase the production machine?
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