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%?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Q2
![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](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fa69d2e54-bb8e-4940-aec5-04e50791cada%2F273f4784-1692-4e0b-95e9-e70039cb0110%2Fj5vf59j_processed.jpeg&w=3840&q=75)
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](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fa69d2e54-bb8e-4940-aec5-04e50791cada%2F273f4784-1692-4e0b-95e9-e70039cb0110%2Fxkpd46_processed.jpeg&w=3840&q=75)
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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