Particulars Amount ($) Sales 2,735,000 Less: Variable expenses 45% 1,230,750 Contribution margin 1,504,250 Less: Fixed expenses 735,000 Earnings before depreciation , interest and taxes 769,250 Less: Depreciation 595,000 Earnings after depreciation or EBIT 174,250 Add: Depreciation 595,000 Annual cash inflow 769,250 Computation of actual net present value is required to be computed when variable expenses are changed to 45%.

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Answer 1

Question

Chapter 12, Problem 13F15

NPV is computed by deducting initial investment amount from the present value.

Project’s actual net present value will be calculated in the following way, when variable expenses changes to 45%:

Computation of annual cash inflow when variable expenses changed to 45%:

To determine

Particulars Amount ($)
Sales 2,735,000
Less: Variable expenses 45% 1,230,750
Contribution margin 1,504,250
Less: Fixed expenses 735,000
Earnings before depreciation, interest and taxes 769,250
Less: Depreciation 595,000
Earnings after depreciation or EBIT 174,250
Add: Depreciation 595,000
Annual cash inflow 769,250

Computation of actual net present value is required to be computed when variable expenses are changed to 45%.

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Howard James started a business in 2011 in Jamaica and has been operating in the wholesale/retail industries, where he buys and sells household items to the local market. In 2012, he expanded his business operations and opened two other businesses in Trinidad and Tobago and Antigua and Barbuda, respectively. The annual sales of the respective businesses in 2015 are: Jamaica: J$3,000.00 Trinidad and Tobago: TT$251,000.00 Antigua and Barbuda: $299.00 Mr. James failed to register his business for VAT/GCT as specified by the respective Sales Tax Acts and Regulations. He stated that there is no need for his businesses to be registered because their sales are under the VAT thresholds and thus not required to be registered. a) You are to advise Mr. James if his decision not to register his businesses is justifiable. b) Search the respective VAT Acts for the 3 countries and advise Mr. James of the benefits of being a registered taxpayer; also the penalties for not registering for VAT/GCT.

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Answer 2

Question

Chapter 12, Problem 13F15

NPV is computed by deducting initial investment amount from the present value.

Project’s actual net present value will be calculated in the following way, when variable expenses changes to 45%:

Computation of annual cash inflow when variable expenses changed to 45%:

To determine

Particulars Amount ($)
Sales 2,735,000
Less: Variable expenses 45% 1,230,750
Contribution margin 1,504,250
Less: Fixed expenses 735,000
Earnings before depreciation, interest and taxes 769,250
Less: Depreciation 595,000
Earnings after depreciation or EBIT 174,250
Add: Depreciation 595,000
Annual cash inflow 769,250

Computation of actual net present value is required to be computed when variable expenses are changed to 45%.

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Answer 3

Question

Chapter 12, Problem 13F15

NPV is computed by deducting initial investment amount from the present value.

Project’s actual net present value will be calculated in the following way, when variable expenses changes to 45%:

Computation of annual cash inflow when variable expenses changed to 45%:

To determine

Particulars Amount ($)
Sales 2,735,000
Less: Variable expenses 45% 1,230,750
Contribution margin 1,504,250
Less: Fixed expenses 735,000
Earnings before depreciation, interest and taxes 769,250
Less: Depreciation 595,000
Earnings after depreciation or EBIT 174,250
Add: Depreciation 595,000
Annual cash inflow 769,250

Computation of actual net present value is required to be computed when variable expenses are changed to 45%.

Expert Solution & Answer

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Check out a sample textbook solution

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Answer 4

Question

Chapter 12, Problem 13F15

NPV is computed by deducting initial investment amount from the present value.

Project’s actual net present value will be calculated in the following way, when variable expenses changes to 45%:

Computation of annual cash inflow when variable expenses changed to 45%:

To determine

Particulars Amount ($)
Sales 2,735,000
Less: Variable expenses 45% 1,230,750
Contribution margin 1,504,250
Less: Fixed expenses 735,000
Earnings before depreciation, interest and taxes 769,250
Less: Depreciation 595,000
Earnings after depreciation or EBIT 174,250
Add: Depreciation 595,000
Annual cash inflow 769,250

Computation of actual net present value is required to be computed when variable expenses are changed to 45%.

Expert Solution & Answer

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Answer 5

Chapter 12, Problem 13F15

NPV is computed by deducting initial investment amount from the present value.

Project’s actual net present value will be calculated in the following way, when variable expenses changes to 45%:

Computation of annual cash inflow when variable expenses changed to 45%:

To determine

Particulars Amount ($)
Sales 2,735,000
Less: Variable expenses 45% 1,230,750
Contribution margin 1,504,250
Less: Fixed expenses 735,000
Earnings before depreciation, interest and taxes 769,250
Less: Depreciation 595,000
Earnings after depreciation or EBIT 174,250
Add: Depreciation 595,000
Annual cash inflow 769,250

Computation of actual net present value is required to be computed when variable expenses are changed to 45%.

Answer 6

Chapter 12, Problem 13F15

NPV is computed by deducting initial investment amount from the present value.

Project’s actual net present value will be calculated in the following way, when variable expenses changes to 45%:

Computation of annual cash inflow when variable expenses changed to 45%:

To determine

Particulars Amount ($)
Sales 2,735,000
Less: Variable expenses 45% 1,230,750
Contribution margin 1,504,250
Less: Fixed expenses 735,000
Earnings before depreciation, interest and taxes 769,250
Less: Depreciation 595,000
Earnings after depreciation or EBIT 174,250
Add: Depreciation 595,000
Annual cash inflow 769,250

Computation of actual net present value is required to be computed when variable expenses are changed to 45%.

Answer 7

Chapter 12, Problem 13F15

NPV is computed by deducting initial investment amount from the present value.

Project’s actual net present value will be calculated in the following way, when variable expenses changes to 45%:

Computation of annual cash inflow when variable expenses changed to 45%:

To determine

Particulars Amount ($)
Sales 2,735,000
Less: Variable expenses 45% 1,230,750
Contribution margin 1,504,250
Less: Fixed expenses 735,000
Earnings before depreciation, interest and taxes 769,250
Less: Depreciation 595,000
Earnings after depreciation or EBIT 174,250
Add: Depreciation 595,000
Annual cash inflow 769,250

Computation of actual net present value is required to be computed when variable expenses are changed to 45%.

Answer 8

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Answer 9

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Answer 10

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Answer 11

Ch. 12.A - Basic Present Value Concepts Annual cash inflows...Ch. 12.A - Basic Present value Concepts Julie has just...Ch. 12.A - Prob. 3E Ch. 12.A - Prob. 4E Ch. 12.A - Basic Present Value Concepts The Atlantic Medical...Ch. 12.A - Prob. 6E Ch. 12 - What is the difference between capital budgeting...Ch. 12 - Prob. 2Q Ch. 12 - Prob. 3Q Ch. 12 - Prob. 4Q

Solution Summary: The author explains that NPV is computed by deducting initial investment amount from the present value.

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Chapter 12 Solutions

Particulars	Amount ($)
Sales	2,735,000
Less: Variable expenses 45%	1,230,750
Contribution margin	1,504,250
Less: Fixed expenses	735,000
Earnings before depreciation, interest and taxes	769,250
Less: Depreciation	595,000
Earnings after depreciation or EBIT	174,250
Add: Depreciation	595,000
Annual cash inflow	769,250