2. Data for two alternatives are as follows: Alternative A Investment P 35,000 Annual Benefits 20,000 Annual Operations and Maintenance 6,450 Estimated Life, Years 4 Net Salvage Value 3500 Using an interest rate of 20%, which alternative should be considered? Alternative B P50,000 25,000 13,830 8 0

2. Data for two alternatives are as follows: Alternative A Investment P 35,000 Annual Benefits 20,000 Annual Operations and Maintenance 6,450 Estimated Life, Years 4 Net Salvage Value 3500 Using an interest rate of 20%, which alternative should be considered? Alternative B P50,000 25,000 13,830 8 0

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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Concept explainers

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.

Question

2. Data for two alternatives are as follows:
Alternative A
Investment
P 35,000
Annual Benefits
20,000
Annual Operations and Maintenance
6,450
Estimated Life, Years
4
Net Salvage Value
3500
Using an interest rate of 20%, which alternative should be considered?
Alternative B
P50,000
25,000
13,830
8
0

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5. Compare the following 2 alternatives with a method of your choice. The market rate is 6% and inflation is expected to run at 2.5% per year. Alt A B Construction cost $ Benefits $/yr 450,000 380,000 2,000,000 1,500,000 Salvage 200,000 150,000 Life (yrs) 12 9
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Internal rate of return and modified internal rate of return. Quark Industries has three potential projects, all with an initial cost of $1,900,000. Given the discount rate and the future cash flow of each project, what are the IRRs and MIRRs of the three projects for Quark Industries? Cash Flow Project M Project N Project O Year 1 $500,000 $600,000 $1,000,000 Year 2 $500,000 $600,000 $800,000 Year 3 $500,000 $600,000 $600,000 Year 4 $500,000 $600,000 $400,000 Year 5 $500,000 $600,000 $200,000 Discount rate 9% 13% 16% What is the IRR for project M?
2
At 10% interest, what is the nearest benefit/cost ratio for the following private sector project: Initial Cost 200,000 Additional costs at the EoY 1-2 30.000 Annual Benefits at the EoY 1-10 90,000 Salvage Value 40,000 Project Life 10 Note: Consider the following equation setup: FW(Bene fits) = Annual Bene fits (F/A, 10%, 10) FW(Costs) = Instial Costs + Additional Costs - (F/A, 10%, 2) (F/P, 10%, 8)- Salvage Value %3D 10% Compound Interest Factors F/P P/F A/F A/P F/A P/A 1 1.100 0.9091 1.0000 1.1000 1.000 0.909 2 1.210 0.8264 0.4762 0.5762 2.100 1.736 3 1.331 0.7513 0.3021 0.4021 3.310 2.487 4. 1.464 0.6830 0.2155 0.3155 4.641 3.170 1.611 0.6209 0.1638 0.2638 6.105 3.791 9. 1.772 0.5645 0.1296 0.2296 7.716 4.355 1.949 0.5132 0.1054 0.2054 9.487 4.868 8. 2.144 0.4665 0.0874 0.1874 11.436 5.335 6. 2.358 0.4241 0.0736 0.1736 13.580 5.759 10 2.594 0.3855 0.0627 0.1627 15.937 6.145 11 2.853 0.3505 0.0540 0.1540 18.531 6.495 12 3.138 0.3186 0.0468 0.1468 21.384 6.814 13 3.452 0.2897 0.0408…
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5. Project A has the net present value at a discount rate of 17% is $5,380 and at a rate of 19% the net present value is at ($2,670). What is the internal rate of return for the project? A 15.7% B 16.5% C 18.3% D 17.6%