Helen has been working with a small travel agency for the past few years to learn the business and to better understand what costsare necessary to run it. Now, having been in the business world for a few years, she's ready to start her own travel agency, specializingin "off the grid" locations. She knows there will be both overhead costs and labor costs, since she intends to hire one assistant. Thefollowing chart outlines her estimates thus far.Annual net operating cash flows$4,100Initial asset investment$10,100Asset life in years8Salvage value of asset at end of useful life$1,100Tax rate25%"After assistant and overhead costs, but does not include a salary for Helen.As a new business owner, Helen only expects to earn a 5% rate of return. She conducted an initial NPV anlaysis for an 8-year interval,recognizing that she'll make some significant adjustments after that point. Her initial analysis revealed a positive NPV.

6. Workings for NPVWe'll discount each year's cash flow back to present value and sum them up. Then…

Answered: Helen has been working with a small…

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter3: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 10EB: Keleher Industries manufactures pet doors and sells them directly to the consumer via their web...

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Karen has been working with a small travel agency for the past few years to learn the business and to better understand what costs are necessary to run it. Now, having been in the business world for a few years, she's ready to start her own travel agency, specializing in "off the grid" locations. She knows there will be both overhead costs and labor costs, since she intends to hire one assistant. The following chart outlines her estimates thus far. Annual net operating cash flowsa Initial asset investment Asset life in years Salvage value of asset at end of useful life Tax rate (a) $3,800 $9,800 NPV $ 8 *After assistant and overhead costs, but does not include a salary for Karen. As a new business owner, Karen only expects to earn a 5% rate of return. She conducted an initial NPV anlaysis for an 8-year interval, recognizing that she'll make some significant adjustments after that point. Her initial analysis revealed a positive NPV. Click here to view the factor table Karen's…
Karen has been working with a small travel agency for the past few years to learn the business and to better understand what costs are necessary to run it. Now, having been in the business world for a few years, she's ready to start her own travel agency, specializing in "off the grid" locations. She knows there will be both overhead costs and labor costs, since she intends to hire one assistant. The following chart outlines her estimates thus far. Annual net operating cash flows³ Initial asset investment Asset life in years $3,800 $9,800 8 Salvage value of asset at end of useful life $1,000 Tax rate 25% a After assistant and overhead costs, but does not include a salary for Karen. As a new business owner, Karen only expects to earn a 5% rate of return. She conducted an initial NPV anlaysis for an 8-year interval, recognizing that she'll make some significant adjustments after that point. Her initial analysis revealed a positive NPV. Click here to view the factor table (a) Rerun the…
Please help me with c. Thanks!
Ashley is a fresh graduate and is now planning to start a new business. She would run an online shop to sell snacks imported from Japan. She expects the annual purchase cost would be $380,000 and the annual sales would be $790,000. Four sets of computers are needed, which cost $7,000 each and could be sold at half price in the second-hand market after one year. She has to rent a small office, which costs her $19,000 per month. (i) Calculate the annual accounting profit of Ashely's snack business. (ii) Ashley will be involved in the daily operations of this snack business and has to give up the opportunity to get a full-time job. În consideration of annual economic profit, in what condition should Ashley start this business? Explain with relevant figures.
Tom has recently opened The Sandal Shop in Warsaw (a store that specializes in fashionable sandals). In time, she hopes to open a chain of sandal shops. As a first step, she has gathered the following data for her new store: Sales price per pair of sandals $ 50,00 Variable expenses per pair of sandals $ 25,00 Contribution margin per pair of sandals $ 25,00 Fixed expenses per year: Building rental $ 14 000,00 Equipment depreciation $ 6 500,00 Selling $ 15 000,00 Administrative $ 19 500,00 Total fixed expenses $ 55 000,00 Required:1. What is the break-even point in unit sales and dollar sales? (Please interpret gained result) 2. Anna has decided that she must earn a profit of $20,000 the first year to justify her time and effort. How many pairs of sandals must be sold to attain this target profit? 3. Anna now has two salespersons working in the store—one full time…
Suppose, you start your own business which is a pet store. The total cost of purchasing supplies and hiring labor is $50,000 per year. To run the pet store, you quit your job that pays $45,000 per year and use the building that you already own (a building like yours rents out for $60,000 per year). Also, your car payment is $24,000 per year (you may use your car for the business sometimes). What is the total opportunity cost of opening up a pet store for a year?
You plan on starting a lawn mowing business by investing $700 of your own money and purchase $500 of equipment. You plan to work 330 hours per month and charge your customers $18 per hour. Your anticipated costs include: Advertising Gas $18.00 per month Depreciation $1.40 per hour $33.00 per month $10.00 per hour Assistant's Wages Miscellaneous Expenses $40.00 per month Calculate the Equipment net of Accumulated Depreciation at the end of your second month of business on the budgeted balance sheet. +
Suppose that you have been given a summer job as an intern at Issac Aircams, a company that man- ufactures sophisticated spy cameras for remote-controlled military reconnaissance aircraft. The company, which is privately owned, has approached a bank for a loan to help it finance its growth. The bank requires financial statements before approving such a loan. You have been asked to help prepare the financial statements and were given the following list of costs: Depreciation on salespersons’ cars. Rent on equipment used in the factory. Lubricants used for machine maintenance. Salaries of personnel who work in the finished goods warehouse. Soap and paper towels used by factory workers at the end of a shift. Factory supervisors’ salaries. Heat, water, and power consumed in the factory. Materials used for boxing products for shipment overseas. (Units are not normally boxed.) Advertising costs. Workers’ compensation insurance for factory employees. Depreciation on…
Gloria is planning on opening a cake shop. She has found a location that rents for $15,550 per year and it will cost her another $13,716 to furnish the shop and purchase all the necessary equipment. She plans on charging $20 for a cake and it will cost her $3 per cake for ingredients and $1.92 per cake for decorations and $1.59 per cake for the beautiful, colorful to-go boxes. What is the dollar breakeven point she will need to earn to cover her costs in the first year? Round to the nearest whole number.
You work in a Finance department and are asked to analyze the economics of an existing jet, which would be retired in four years. A new jet is purchased each time a jet is retired because the CEO travels regularly. If other managers use the existing jet, the company would save $1,000,000 each year on commercial airline flights, however, operating costs (e.g. fuel, maintenance) for the existing jet would be $700,000 greater each year, and the jet would need to be replaced at the end of three years instead of four. Assume the company does not pay taxes. The opportunity cost of capital is 9%. Assume a new jet costs $10 million and has a life of ten years. Assume GE would not allow other managers to use a new jet. Question: Should the company allow other officers to use the existing jet (i.e. allow managers to use the existing jet for three years, but not use the new jet)?
The story: You have been offered a new position with an increase in your pay, within the company, but will have to move to take the position. Comparable rentals to accommodate your lifestyle are 30% in the new city. Food is also pricier. You want to save the same percent of your income in the new job. This exercise will challenge you on creating a worksheet, entering relative formulas, formatting, print setup, and analysis. Income: Current Proposed Yearly $50,000 $60,000 Monthly ? ? Expenses Current Proposed Rent $1000 $1300 Car payment $400 $400 Insurance $300 $400 Utilities $300 $400 Cell phone $75 $75 Food $250 $400 Savings 20% of pay 20% of pay Total Monthly Expenses: ? ? Net Income ? ? Complete the following steps: Create a workbook to reflect the above. Populate the “?” with formulas Apply formula for the net, that is the income less the expenses Format for the target audience Verify that printing the worksheet will please target audience Does it make sense for you to…
Marvin Turner was discussing summer employment with Tina Song, president of Motown Construction Service:Tina: I’m glad you’re thinking about joining us for the summer. We certainly can use the help. Marvin: Sounds good. I enjoy outdoor work, and I could use the money to help with next year’s school expenses.Tina: I’ve got a plan that can help you out on that. As you know, I’ll pay you $14 per hour, but in addition, I’d like to pay you with cash. Since you’re only working for the summer, it really doesn’t make sense for me to go to the trouble of formally putting you on our payroll system. In fact, I do some jobs for my clients on a strictly cash basis, so it would be easy just to pay you that way.Marvin: Well, that’s a bit unusual, but I guess money is money.Tina: Yeah, not only that, it’s tax-free!Marvin: What do you mean?Tina: Didn’t you know? Any money that you receive in cash is not reported to the IRS on a W-2 form; therefore, the IRS doesn’t know about the income—hence, it’s the…

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