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Required: 1. Compute payback period of the truck. Is the investment in new truck desirable if maximum desired payback period of the Euro Transport company is 5 years? 2. Compute the accounting rate of return promised by the truck. Would the Euro Transport company be interested in new truck if minimum required accounting rate of return is 12%?

Required: 1. Compute payback period of the truck. Is the investment in new truck desirable if maximum desired payback period of the Euro Transport company is 5 years? 2. Compute the accounting rate of return promised by the truck. Would the Euro Transport company be interested in new truck if minimum required accounting rate of return is 12%?

FINANCIAL ACCOUNTING
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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Total operating expenses $90,125 Net operating income $34,875 Required: 1. Compute payback period off the truck. Is the investment in new truck desirable if maximum desired payback period of the Euro Transport company is 5 years? 2. Compute the accounting rate of return promised by the truck. Would the Euro Transport company be interested in new truck if minimum required accounting rate of return is 12%? Q3- The Sunshine company is considering two projects, project A and project B. Project A requires the purchase of an equipment but no working capital investment whereas project B requires a working capital investment but no equipment. The relevant information for net present value analysis is given below: Project A Project B $600,000 Cost of equipment Working capital needed Annual cash inflows $600,000 $160,000 $120,000 $40,000 Salvage value (scrap value) of equipment Project life The working capital required for project B will be released at the end of project life. Sunshine company uses an 18% discount rate. Required: Are the two projects comparable using net present value (NPV)? If yes, Select the best investment using net present value (NPV) 8 years 8 Years method. Q4- PQR company sells two products. The total fixed expenses of the company are 1,197,000. The monthly data of PQR is as follows: Products Product A Product B Total $1,400,000 $600,000 $2,000,000 Sales
Transcribed Image Text:Total operating expenses $90,125 Net operating income $34,875 Required: 1. Compute payback period off the truck. Is the investment in new truck desirable if maximum desired payback period of the Euro Transport company is 5 years? 2. Compute the accounting rate of return promised by the truck. Would the Euro Transport company be interested in new truck if minimum required accounting rate of return is 12%? Q3- The Sunshine company is considering two projects, project A and project B. Project A requires the purchase of an equipment but no working capital investment whereas project B requires a working capital investment but no equipment. The relevant information for net present value analysis is given below: Project A Project B $600,000 Cost of equipment Working capital needed Annual cash inflows $600,000 $160,000 $120,000 $40,000 Salvage value (scrap value) of equipment Project life The working capital required for project B will be released at the end of project life. Sunshine company uses an 18% discount rate. Required: Are the two projects comparable using net present value (NPV)? If yes, Select the best investment using net present value (NPV) 8 years 8 Years method. Q4- PQR company sells two products. The total fixed expenses of the company are 1,197,000. The monthly data of PQR is as follows: Products Product A Product B Total $1,400,000 $600,000 $2,000,000 Sales
Al-Balqa Applied University Amman University College Advanced Managerial Accounting Advanced cost and Managerial Accounting Final Exam 27/01/ 2022 Name: Q1- You have the following data for the four products ( A,B,C,D): PRODUCT VARIABLE FIXED TOTAL NET CONTRIBUTION SALES IN COST COST COST PROFIT MARGIN RATIO DOLLAR 300 M 30% 1500 700 K 1000 1200 500 800 1200 R. F 300 200 2000 Required: Find the unknown values?. Q2 - The Euro Transport company wants to purchase a new truck. The of its 20-year useful life. The annual estimated revenues and costs $125,000 truck would cost $225,000 and its salvage value would be 10% at the end associated with the new truck are given below: Revenues Less operating expenses: $20,000 $45,000 $10,125 $15,000 Maintenance Driver's salary Depreciation Insurance
Transcribed Image Text:Al-Balqa Applied University Amman University College Advanced Managerial Accounting Advanced cost and Managerial Accounting Final Exam 27/01/ 2022 Name: Q1- You have the following data for the four products ( A,B,C,D): PRODUCT VARIABLE FIXED TOTAL NET CONTRIBUTION SALES IN COST COST COST PROFIT MARGIN RATIO DOLLAR 300 M 30% 1500 700 K 1000 1200 500 800 1200 R. F 300 200 2000 Required: Find the unknown values?. Q2 - The Euro Transport company wants to purchase a new truck. The of its 20-year useful life. The annual estimated revenues and costs $125,000 truck would cost $225,000 and its salvage value would be 10% at the end associated with the new truck are given below: Revenues Less operating expenses: $20,000 $45,000 $10,125 $15,000 Maintenance Driver's salary Depreciation Insurance
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