Karen 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 flowsaInitial asset investmentAsset life in yearsSalvage value of asset at end of useful lifeTax rate(a)$3,800$9,800NPV $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 tableKaren's calculations were$1,00025%Rerun the NPV analysis for Karen. Did she correctly determine a positive NPV related to her investment for this 8-year period?State the NPV amount. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and final answer to 2 decimal placese.g. 5,125.36. Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

Net Present Value - It is the difference between the present value of cash outflow and present value…

Answered: Karen has been working with a small…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

Accounting
Sheffield had an incredible year in its landscaping business. With extra cash available, the company is considering one of two possible investments: 1. 2. An additional trailer, to allow for more flexibility in planning and working different jobs simultaneously. A third truck that would allow for additional jobs, but this option would also require an additional worker and the costs associated with hiring. payroll taxes, etc. Financial information for each option is as follows. Initial investment Net annual cash inflow Years of useful life Salvage value Tax rate Required rate of return (a) Option 1 $29,800 $10,400 IRR 4 Option 1 $- 20% 9% Option 2 $41,000 $10,400 % 5 $2,100 Calculate the IRR for both investment options. (Round answers to 2 decimal places, e.g. 15.25%) 20% 9% Option 2 % SUPPORT 11:23 AM
The sales process has gone well. You identified two important needs and shown how your product meets those needs. Your product costs $2,000 per month on a 24-month lease, or $100,000 to purchase plus a $200 per month maintenance agreement. Delivery and installation is $5,000, whether they lease or purchase. Supplies to operate the equipment are likely to run about $1,000 per month, based on the volume shared by the prospect. When the prospect asks, “How much will this cost?,” how do you answer? What additional information would you like to know to help this buyer make the best decision?
Finance
I could use a hand with this
Angie Silva has recently opened The Sandal Shop in Brisbane, Australia, a store that specializes in fashionable sandals. Angie has just received a degree in business and she is anxious to apply the principles she has learned to her business. In time, she hopes to open a chain of sandal shops. As a first step, she has prepared the following analysis for her new store: Sales price per pair of sandals Variable expenses per pair of sandals Contribution margin per pair of sandals Fixed expenses per year Building rental Equipment depreciation Selling Administrative Total fixed expenses 2.00 120 080 $ 9,000 5,000 17,600 18,000 49 600 Required: 1. How many pairs of sandals must be sold each year to break even? What does this represent in total dollar sales? pairs Break-even point in unit sales Break-even point in dollar sales 3. Angie has decided that she must eam at least $1,600 the first year to justifty her time and effort. How many pairs of sandals must be sold to reach this target profit?…
Mike is considering quitting his job to start a bakery, his dream work. To do so, he would need to make an investment of $80,000 today. He estimates that the bakery would generate revenues of $90,000 over the next five years and would require $20,000 in expenses. At his current job he earns $50,000. Therefore, Mike estimates that the incremental cash flows from opening the bakery would be $20,000 per year for the next five years. Calculate the NPV of the business using a discount rate of 15%. Should Mike quit his job and start the bakery? Calculate the IRR for the project described in problem 3. If Mike requires a return of 15% on the business, should he start the bakery?
Heels, a shoe manufacturer, is evaluating the costs and benefits of new equipment that would custom fit each pair of athletic shoes. The customer would have his or her foot scanned by digital computer equipment; this information would be used to cut the raw materials to provide the customer a perfect fit. The new equipment costs $90,000 and is expected to generate an additional $35,000 in cash flows for five years. A bank will make a $90,000 loan to the company at a 10% interest rate for this equipment’s purchase. Use the following table to determine the break-even time for this equipment. (Round the present value of cash flows to the nearest dollar.)
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…
You are an employee of University Consultants, Limited, and have been given the following assignment. You are to present an investment analysis of a small retail income-producing property for sale to a potential investor. The asking price for the property is $1,430,000; rents are estimated at $183,040 during the first year and are expected to grow at 2.5 percent per year thereafter. Vacancies and collection losses are expected to be 10 percent of rents. Operating expenses will be 35 percent of effective gross income. A fully amortizing 70 percent loan can be obtained at 8 percent interest for 30 years (total annual payments will be monthly payments × 12). The property is expected to appreciate in value at 4 percent per year and is expected to be owned for five years and then sold. Required: a. What is the first-year debt coverage ratio? b. What is the terminal capitalization rate? c. What is the investor's expected before-tax internal rate of return on equity invested (BTIRR)? d. What…
find the free cash from from year 0 to year 10
Professional cuddling therapy is a growing industry. You think you might be really good at cuddling so you decide to open a cuddle therapy business. Setting up the business will cost $14,000. Your business will be an all cash business so net income will be equal to your cash flows. You expect to earn $3,000 in net income in your first year of business and $4,000 in net income in the second year. In your third year you will sell the business for $15,000. These are all the cash flows associated with your cuddling business. The cost of capital is 15%. What is the NPV of this project? What is the IRR?

SEE MORE QUESTIONS

Recommended textbooks for you

FINANCIAL ACCOUNTING

Accounting

ISBN:

9781259964947

Author:

Libby

Publisher:

MCG

Accounting

ISBN:

9781337272094

Author:

WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.

Publisher:

Cengage Learning,

Accounting Information Systems

Accounting

ISBN:

9781337619202

Author:

Hall, James A.

Publisher:

Cengage Learning,

FINANCIAL ACCOUNTING

Accounting

ISBN:

9781259964947

Author:

Libby

Publisher:

MCG

Accounting

ISBN:

9781337272094

Author:

WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.

Publisher:

Cengage Learning,

Accounting Information Systems

Accounting

ISBN:

9781337619202

Author:

Hall, James A.

Publisher:

Cengage Learning,

Horngren's Cost Accounting: A Managerial Emphasis…

Accounting

ISBN:

9780134475585

Author:

Srikant M. Datar, Madhav V. Rajan

Publisher:

PEARSON

Intermediate Accounting

Accounting

ISBN:

9781259722660

Author:

J. David Spiceland, Mark W. Nelson, Wayne M Thomas

Publisher:

McGraw-Hill Education

Financial and Managerial Accounting

Accounting

ISBN:

9781259726705

Author:

John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS