Toselli Animation plans to offer its employees a salary enhancement package that has revenue sharing as its main component. Specifically, the company will set aside 1% of total sales revenue for year-end bonuses. The sales are expected to be $5 million the first year, $5.5 million the second year, and amounts increasing by 10% each year for the next 5 years. At an interest rate of 14% per year, what is the equivalent annual worth in years 1 through 5 of the bonus package? The equivalent annual worth of the bonus package is $

Toselli Animation plans to offer its employees a salary enhancement package that has revenue sharing as its main component. Specifically, the company will set aside 1% of total sales revenue for year-end bonuses. The sales are expected to be $5 million the first year, $5.5 million the second year, and amounts increasing by 10% each year for the next 5 years. At an interest rate of 14% per year, what is the equivalent annual worth in years 1 through 5 of the bonus package? The equivalent annual worth of the bonus package is $

Financial Accounting Intro Concepts Meth/Uses

14th Edition

ISBN:9781285595047

Author:Weil

Publisher:Weil

ChapterA: Appendix - Time Value Of Cash Flows: Compound Interest Concepts And Applications

Section: Chapter Questions

Problem 30P

See similar textbooks

Related questions

Q: A business has two investment choices. Alternative 1 requires an immediate outlay of $2,000 and…

A: Here, Initial Outlay of Alternative-1 is $2,000 Initial Outlay of Alternative-2 is $3,000 Return in…

Q: Solar Hydro manufactures a revolutionary aeration system that combines coarse and fine bubble…

A: EAC is computed below:

Q: What is the present value of the first alternative? What is the present value of the second…

A: Net present value: The net present value of money is the method that compares the present value of…

Q: An aerospace engineer is signing up a consulting agreement with the Balalae Airport in Solomon…

A: The time value of money becomes an important factor for capital budgeting decisions. It is an idea…

Q: Lions Co. has machinery that cost $150,000. It is to be leased for 15 years with rent received at…

A: Lease is defined as the agreement formed between two parties namely lessor and lessee, under which…

Q: Halliford Corporation expects to have earnings this coming year of $2.73 per share. Halliford plans…

A: Step 1 : Calculate the growth rate for each yearGrowth rate = retention rate * rate of return…

Q: Halliford Corporation expects to have earnings this coming year of $3.18 per share. Halliford plans…

A: When the company receives profits and distributes them among the shareholders. That share of profit…

Q: Roche Brothers is considering a capacity expansion of its supermarket. The landowner will build the…

A: A company's cash flow may rise or fall as a result of accepting a new project or making an…

Q: The engineering team at Manuel’s Manufacturing, Inc., is planning to purchase an enterprise resource…

A: a) Computation:

Q: A company plans on purchasing a new piece of equipment in six years. The equipment is expected to…

A: Compound interest is a method of calculating interest on the initial principal, which also includes…

Q: The sales for the Year 2020-21 are $1,000,000 which includes receivables of $177,000. The owner is…

A: The calculations of amount received is as represented:

Q: In order to build a new warehouse facility, the regional distributor for Valco Multi-position Valves…

A: Borrowed amount = $1,600,000 Interest rate = 10% Time period = 2 years Future value=Borrowed…

Question

Toselli Animation plans to offer its employees a salary enhancement package that has revenue sharing as its main component.
Specifically, the company will set aside 1% of total sales revenue for year-end bonuses. The sales are expected to be $5 million the first
year, $5.5 million the second year, and amounts increasing by 10% each year for the next 5 years. At an interest rate of 14% per year,
what is the equivalent annual worth in years 1 through 5 of the bonus package?
The equivalent annual worth of the bonus package is $

Expert Solution

Step 1

Annual worth distributes present worth into equivalent uniform value over its useful life.

Trending now

This is a popular solution!

Step by step

Solved in 2 steps with 2 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

4. Hughes Cable Systems plans to offer its employees a salary enhancement package that has revenue sharing as its main component. Specifically, the company will set aside I % of total sales for yearend bonuses for all its employees. The sales are expected to be $5 million the first year, $6 million the second year, and amounts increasing by 20% each year for the next 5 years. At an interest rate of 10% per year, what is the equivalent annual worth in years I through 5 of the bonus package?
Next year Baldwin plans to include an additional performance bonus of 0.25% in its compensation plan. This incentive will be provided in addition to the annual raise, if productivity goals are reached. Assuming the goals are reached, how much will Baldwin pay its employees per hour? $28.22 $29.63 $28.15 $31.04
A certain company pays a bonus to each engineer at the end of each year based on the company’s profit for that year. If the company invested $ 2 million to start up, what rate of return has it made if each engineer’s bonus has been $3000 per year for the past 10 years? Assume the company has six engineers and that the bonus money paid represents 5% of the company’s profit.
A company is planning to invest $75,000 (before taxes) in a personnel training program. The $75,000 outlay will be charged off as an expense by the firm this year (year 0). The returns estimated from the program in the form of greater productivity and a reduction in employee turnover are as follows (on an after-tax basis):Years 1–10: $7,500 per yearYears 11–20: $22,500 per yearThe company has estimated its cost of capital to be 15 percent. Assume that the entire $75,000 is paid at time zero (the beginning of the project). The marginal tax rate for the firm is 40 percent.Based on the NPV criterion, should the firm undertake the training program?
A company is planning to invest $75,000 (before taxes) in a personnel training program. The $75,000 outlay will be charged off as an expense by the firm this year (year 0). The returns estimated from the program in the form of greater productivity and a reduction in employee turnover are as follows (on an after-tax basis): Years 1–5: $7,500 per year Years 6–10: $22,500 per year The company has estimated its cost of capital to be 15 percent. Assume that the entire $75,000 is paid at time zero (the beginning of the project). The marginal tax rate for the firm is 40 percent. Complete the following table to compute the net present value (NPV) of the program. (Hint: When calculating cash flow for Year 0, consider the tax effects of charging off the initial outlay as an expense.) Year Cash Flow PV Interest Factor at 15% Present Value (PV) ($) ($) 0 1.00000 1 0.86957 2 0.75614 3 0.65752 4 0.57175 5…
The ZLC consulting firm just signed an agreement to provide services to another firm. In doing so, ZLC will receive $100,000 today, and then annual payments of $70,000 per year for 5 years, with first annual payment starting one year from today. What is the present value of this agreement if the appropriate discount rate is 8.50% compounded annually?
By the end of this year, the total payroll expenditure of a small engineering consulting firm is $375,000. If a raise of 6% is given each year thereafter, calculate the future worth of the employees’ salaries over the next six years to follow. The interest rate is 10% compounded annually. The interest rate is 10% compounded annually.
A company is planning to invest $100,000 (before tax) in a personnel training program. The $100,000 outlay will be charged off as an expense by the firm this year (year 0). The returns from the program in the form of greater productivity and a reduction in employee turnover are estimated as follows (on an after-tax basis): Years 1-10: $10,000 per year Years 11-20: $22,000 per year The company has estimated its cost of capital to be 12 percent. Assume that the entire $100,000 is paid at time 0 (the beginning of the project). The marginal tax rate for the firm is 40 percent. Should the firm undertake the training program? Why or why not?
A company is considering the following three compensation plans for the salespeople listed in the table below. Which of these will be the most expensive? Which will be the least expensive? Is the monetary cost the only consideration for a company? Plan A: Give each salesperson a commission of 10% on the first $250,000 of sales made each year and 12% on the next $250,000. Plan B: Give each salesperson a salary of $10,000 a year and 5% commission on all sales made each year. Plan C: Give each salesperson a salary of $25,000 a year and a bonus of 4% commission on all sales made over $250,000 in a year. Salesperson Estimated Sales for Next Year Herndon $300,000 MacLeon $270,000 Menon $190,000 Baker $290,000 Hand $225,000 Zank $325,000 Smith $310,000 2. Based on the chapter content on motivation, what factors cause you to increase or decrease the amount of effort – your motivation to work – you put into earning your desired grade in a class? Your grade is your performance level. What…
Windsor Tool Inc. has a $500,000 loan for a new EDM machine to be used in the tool/die production. The interest rate for this loan is 6% compounded annually. The finance manager decides that the company will make $40,000 payment each year, starting the end of the first year. By calculation, it will take the company N years to pay back the loan. Notice that the payments for Year1 to Year(N-1) will be $40,000 as planned. The last payment at the end of Year-N will be smaller than $40,000. First, calculate the value for N=? (years) Second, calculate the last payment for Year(N)=? Notice that this is a Multi-Answer question, you have to pick one for the number of years and pick one for the last payment amount. N=22 Years N=24 Years N=26 Years N=28 Years Payment for last Year = $31,905. Payment for last Year = $16,794. Payment for last Year = $10,540. Payment for last Year = $36,555.
Corgi, Inc. plans to update its equipment at a total cost of $99,000. Management anticipates making a $19,000 down payment and borrowing the remainder from a local commercial bank at 14 percent interest. The first option provides for five equal, annual payments to be made at the end of the year. The second option requires five equal, annual payments plus a balloon payment of $19,000 at the end of the fifth year. What are the annual payments required by each option? Use Appendix B and Appendix D to answer the question. Round your answers to the nearest cent. The annual payment under the first option: $ The annual payment under the second option: $
Roger Sterling has decided to buy an ad agency and is going to finance the purchase with seller financing-that is, a loan from the current owners of the agency. The loan will be for 2,100,000 financed at an APR of 8 percent compounded monthly. This loan will be paid off over 7 years with end o month payments, along with a 600,000 balloon payment at the end of year 7. That is, the 2.1 million loan will be paid off with monthly payments, and there will also be a final payment of 600,000 at the end of the final month. How much will the monthly payments be?