Yoga, Spa, and Swim Club is planning for the coming year Investors would like to eam a 10% retum on the company's $39.000.000 of assets. The company primarly incurs fixed costs to mu the swimming pools Fixed costs are projected to be $12,600,000 for the year. About 520,000 members are expected to swim each year Variable costs are about $10 per swimmer The clubi price-taker and won't be able to charge more than its competitors who charge $38 for a membership. What profit (ees) will it eam in terms of dollars? OA $12.600.000 OB $1,960,000 OC. $7,919.962 OD. $(1,960,000)

Yoga, Spa, and Swim Club is planning for the coming year Investors would like to eam a 10% retum on the company's $39.000.000 of assets. The company primarly incurs fixed costs to mu the swimming pools Fixed costs are projected to be $12,600,000 for the year. About 520,000 members are expected to swim each year Variable costs are about $10 per swimmer The clubi price-taker and won't be able to charge more than its competitors who charge $38 for a membership. What profit (ees) will it eam in terms of dollars? OA $12.600.000 OB $1,960,000 OC. $7,919.962 OD. $(1,960,000)

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter19: Capital Investment

Section: Chapter Questions

Problem 4CE: Manzer Enterprises is considering two independent investments: A new automated materials handling...

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Gina Ripley, president of Dearing Company, is considering the purchase of a computer-aided manufacturing system. The annual net cash benefits and savings associated with the system are described as follows: The system will cost 9,000,000 and last 10 years. The companys cost of capital is 12 percent. Required: 1. Calculate the payback period for the system. Assume that the company has a policy of only accepting projects with a payback of five years or less. Would the system be acquired? 2. Calculate the NPV and IRR for the project. Should the system be purchasedeven if it does not meet the payback criterion? 3. The project manager reviewed the projected cash flows and pointed out that two items had been missed. First, the system would have a salvage value, net of any tax effects, of 1,000,000 at the end of 10 years. Second, the increased quality and delivery performance would allow the company to increase its market share by 20 percent. This would produce an additional annual net benefit of 300,000. Recalculate the payback period, NPV, and IRR given this new information. (For the IRR computation, initially ignore salvage value.) Does the decision change? Suppose that the salvage value is only half what is projected. Does this make a difference in the outcome? Does salvage value have any real bearing on the companys decision?
Manzer Enterprises is considering two independent investments: A new automated materials handling system that costs 900,000 and will produce net cash inflows of 300,000 at the end of each year for the next four years. A computer-aided manufacturing system that costs 775,000 and will produce labor savings of 400,000 and 500,000 at the end of the first year and second year, respectively. Manzer has a cost of capital of 8 percent. Required: 1. Calculate the IRR for the first investment and determine if it is acceptable or not. 2. Calculate the IRR of the second investment and comment on its acceptability. Use 12 percent as the first guess. 3. What if the cash flows for the first investment are 250,000 instead of 300,000?
Philadelphia Swim Club is planning for the coming year. Investors would like to earn a 10% return on the company's $30 million of assets. The company primarily incurs fixed costs to maintain the swimming pools. Fixed costs are projected to be $12,500,000 for the year. About 500,000 members are expected to swim each year. Variable costs are about $10 per swimmer. Philadelphia Swim Club won't be able to charge more than its competitors who charge $37.00 for a membership. What profit (loss) will it earn in terms of dollars? Select one: a. $(12,500,000) b. $11,000,000 c. $1,000,000 d. $2,500,000 e. $(1,000,000)
Philadelphia Swim Club is planning for the coming year. Investors would like to earn a 10% return on the company's $ 38 comma 000 comma 000$38,000,000 of assets. The company primarily incurs fixed costs to maintain the swimming pools. Fixed costs are projected to be $ 12 comma 900 comma 000$12,900,000 for the year. About 550 comma 000550,000 members are expected to swim each year. Variable costs are about $ 14$14 per swimmer. Philadelphia Swim Club is a priceminus−taker and won't be able to charge more than its competitors who charge $ 38$38 for a membership. What profit will it earn as a percent of assets?
Rosemont Tennis is planning for the coming year. Investors would like to earn a 12% return on the company’s $22,145,834 in assets. The company primarily incurs fixed costs to maintain the tennis courts. Fixed costs are projected to be $10,036,241 for the year. About 500,000 court time hours are expected to be played each year. Variable costs are about $5 per hour of court time. The Rosemont Country Club and Tennis Courts has a favorable reputation in the area and therefore, has some control over the price per hour of court time. Using a cost-plus approach, what price should Rosemont Tennis charge for an hour of court time? Do not round your intermediate calculations. Input your final answer to two decimal places, for example, 20.3473. should be input as 20.35
Rocky Pines golf course is planning for the coming season. Investors would like to earn a 12% return on the company's $47,000,000 of assets. The company primarily incurs fixed costs to groom the greens and fairways Fixed costs are projected to be $20,000,000 for the golfing season About 450,000 golfers are expected each year. Variable costs are about $20 per golfer Rocky Pines golf course has a favorable reputation in the area and therefore, has some control over the price of a round of golf. Using a cost-plus approach, what price should the course charge for a round of golf? (Round the final answer to the nearest cent) OA $110.00 OB$76.98 OC $20.00 OD 564 44
Mountaintop golf course is planning for the coming season. Investors would like to earn a 12% return on the company’s $45,000,000 of assets. The company primarily incurs fixed costs to groom the greens and fairways. Fixed costs are projected to be $25,000,000 for the golfing season. About 430,000 golfers are expected each year. Variable costs are about $17 per golfer. Mountaintop golf course has a favorable reputation in the area and therefore, has some control over the price of a round of golf. Using a cost-plus approach, what price should Mountaintop charge for a round of golf.
Rocky Pines golf course is planning for the coming season. Investors would like to earn a 12% return on the company's $49,000,000 of assets. The company primarily incurs fixed costs to groom the greens and fairways. Fixed costs are projected to be $25,000,000 for the golfing season. About 450,000 golfers are expected each year. Variable costs are about $16 per golfer. Rocky Pines golf course has a favorable reputation in the area and therefore, has some control over the price of a round of golf. Using a cost - plus approach, what price should the course charge for a round of golf? (Round the final answer to the nearest cent.) OA. $84.62 B. $16.00 O C. $71.56 OD. $121.96 1
eEgg is considering the purchase of a new distributed network computer system to help handle its warehouse inventories. The system costs $50,000 to purchase and install and $32,000 to operate each year. The system is estimated to be useful for 4 years. Management expects the new system to reduce the cost of managing inventories by $58,000 per year. The firm’s cost of capital (discount rate) is 11%. Required: 1. What is the net present value (NPV) of the proposed investment under each of the following independent situations? (Use the appropriate present value factors from Appendix C, TABLE 1 and Appendix C, TABLE 2.) 1a. The firm is not yet profitable and therefore pays no income taxes. 1b. The firm is in the 26% income tax bracket and uses straight-line (SLN) depreciation with no salvage value. Assume MACRS rules do not apply. 1c. The firm is in the 26% income tax bracket and uses double-declining-balance (DDB) depreciation with no salvage value. Given a four-year life, the DDB…
eEgg is considering the purchase of a new distributed network computer system to help handle its warehouse inventories. The system costs $60,000 to purchase and install and $30,000 to operate each year. The system is estimated to be useful for 4 years. Management expects the new system to reduce the cost of managing inventories by $62,000 per year. The firm's cost of capital (discount rate) is 9%. Required: 1. What is the net present value (NPV) of the proposed investment under each of the following independent situations? (Use the appropriate present value factors from Appendix C. TABLE 1 and Appendix C. TABLE 2.) 1a. The firm is not yet profitable and therefore pays no income taxes. 1b. The firm is in the 25% income tax bracket and uses straight-line (SLN) depreciation with no salvage value. Assume MACRS rules do not apply. 1c. The firm is in the 25% income tax bracket and uses double-declining-balance (DDB) depreciation with no salvage value. Given a four-year life, the DDB…
es eEgg is considering the purchase of a new distributed network computer system to help handle Its warehouse Inventories. The system costs $55,000 to purchase and install and $32,000 to operate each year. The system is estimated to be useful for 4 years. Management expects the new system to reduce the cost of managing Inventories by $60,000 per year. The firm's cost of capital (discount rate) is 10%. Required: 1. What is the net present value (NPV) of the proposed Investment under each of the following Independent situations? (Use the appropriate present value factors from Appendix C, TABLE 1 and Appendix C. TABLE 2.) 1a. The firm is not yet profitable and therefore pays no income taxes. 1b. The firm is in the 22% Income tax bracket and uses straight-line (SLN) depreciation with no salvage value. Assume MACRS rules do not apply. 1c. The firm is in the 22% Income tax bracket and uses double-declining-balance (DDB) depreciation with no salvage value. Given a four-year life, the DDB…
eEgg is considering the purchase of a new distributed network computer system to help handle its warehouse inventories. The system costs $55,000 to purchase and install and $32,000 to operate each year. The system is estimated to be useful for 4 years. Management expects the new system to reduce the cost of managing inventories by $61,500 per year. The firm’s cost of capital (discount rate) is 11%. The firm is in the 30% income tax bracket and uses double-declining-balance (DDB) depreciation with no salvage value. Given a four-year life, the DDB depreciation rate is 50% (i.e., 2 × 25%). In year four, record depreciation expense as the net book value (NBV) of the asset at the start of the year.