Toy Time Products is considering producing toy action figures and sandbox toys. The products require different specialized machines, each costing $1 million. Each machine has a five-year life and zero residual value. The two products have different patterns of predicted net cash inflows. (Click the icon to view the data.) Calculate the sandbox toy project's ARR. If the sandbox toy project had a residual value of $225,000, would the ARR change? Explain and recalculate if necessary. Does this investment pass Toy Time's ARR screening rule? First, enter the formula, then compute the ARR of the sandbox toy project. (Enter amounts in dollars, not millions. Enter your answer as a percent rounded to two decimal places.) Accounting rate of return Get more help. Data table C Annual Net Cash Inflows Toy action figure Sandbox toy project project Year Year 1...........$ Year 2.. Year 3.... Year 4.... Year 5... $ 317,750 $ 317,750 317,750 317,750 317,750 1,588,750 $ 530,000 375,000 330,000 270,000 20,000 1,525,000 Total Toy Time will consider making capital investments only if the payback period of the project is less than 3.5 years and the ARR exceeds 8%. X [ Clear all Check answer

Toy Time Products is considering producing toy action figures and sandbox toys. The products require different specialized machines, each costing $1 million. Each machine has a five-year life and zero residual value. The two products have different patterns of predicted net cash inflows. (Click the icon to view the data.) Calculate the sandbox toy project's ARR. If the sandbox toy project had a residual value of $225,000, would the ARR change? Explain and recalculate if necessary. Does this investment pass Toy Time's ARR screening rule? First, enter the formula, then compute the ARR of the sandbox toy project. (Enter amounts in dollars, not millions. Enter your answer as a percent rounded to two decimal places.) Accounting rate of return Get more help. Data table C Annual Net Cash Inflows Toy action figure Sandbox toy project project Year Year 1...........$ Year 2.. Year 3.... Year 4.... Year 5... $ 317,750 $ 317,750 317,750 317,750 317,750 1,588,750 $ 530,000 375,000 330,000 270,000 20,000 1,525,000 Total Toy Time will consider making capital investments only if the payback period of the project is less than 3.5 years and the ARR exceeds 8%. X [ Clear all Check answer

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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Concept explainers

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.

Question

Toy Time Products is considering producing toy action figures and sandbox toys. The products require different specialized machines, each costing $1 million. Each machine has a five-year life and
zero residual value. The two products have different patterns of predicted net cash inflows.
(Click the icon to view the data.)
Calculate the sandbox toy project's ARR. If the sandbox toy project had a residual value of $225,000, would the ARR change? Explain and recalculate if necessary. Does this investment pass
Toy Time's ARR screening rule?
First, enter the formula, then compute the ARR of the sandbox toy project. (Enter amounts in dollars, not millions. Enter your answer as a percent rounded to two decimal places.)
Accounting
= rate of return
Get more help.
÷
Data table
Annual Net Cash Inflows
Toy action figure Sandbox toy
project
project
Year
Year 1.
Year 2.
Year 3.
Year 4.
Year 5..
Total
Toy Time will consider making capital investments only if the
payback period of the project is less than 3.5 years and the
ARR exceeds 8%.
$
$
317,750 $
530,000
317,750
375,000
317,750
330,000
317,750
270,000
317,750
20,000
1,588,750 $ 1,525,000
X
Clear all
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Step 1: Define Accounting rate of return

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Step 2: Computation of accounting rate of return when residual vale is zero is as follows

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Step 3: Computation of accounting rate of return when residual value is given is as follows

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