Answer:
answer is A
Credit card companies use a person's credit report to determine if that person should be given a loan or credit card.
How can organisations handle debtors?
Organizations handle debtors by using various legal and ethical practices such as maintaining accurate records and setting payment terms etc.
Establishing precise payment terms, keeping accurate records, sending timely reminders, providing payment plans and working with debt collection agencies are all ways that businesses can manage their debtors. Organizations can assist in preventing past due payments by establishing clear payment terms and ensuring that debtors understand these terms.
Maintaining accurate records and sending reminders on a regular basis can also assist debtors in keeping up with their payments. Offering payment plans to customers who are having trouble making their payments can be helpful and working with a debt collection agency can help businesses collect past due debts more effectively.
When managing debtors it is crucial for businesses to adhere to legal and moral standards and to treat debtors with professionalism.
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Why is it important to stick to a study schedule even if you are caught up with everything? a It guarantees higher grades on your exams. b It helps to create good study habits. c It is time set aside so you can take a break from watching television. d It gives you more time to play your favorite game without interruption.
Answer:
Explanation:
B - It helps to create good study habits.
Focusing on the primary goals of macroeconomic policy is the most effective way to identify problems and issues that need attention in the economy. Briefly explain the main macroeconomic objectives, making note of any adjustments that may have been necessary in terms of each objective since the corona virus pandemic took place.
Answer:
The primary goals of macroeconomic policy are to promote economic growth, maintain price stability, achieve full employment, and maintain a stable balance of payments.
Economic growth is measured by the increase in a country's GDP over time. The pandemic significantly affected economic growth, as many countries experienced sharp declines in GDP due to lockdowns and reduced economic activity. Governments responded by implementing fiscal and monetary policies to support businesses and individuals during the crisis, including stimulus packages and low interest rates.
Maintaining price stability may also prevent inflation and ensure the purchasing power of a currency. Inflation was a concern during the pandemic due to supply chain disruptions and increased demand for certain goods. Central banks adjusted monetary policies to address inflation, such as raising interest rates.
Achieving full employment is a key macroeconomic objective. It promotes social stability and reduces income inequality. The pandemic has caused job losses and increased unemployment rates in many countries. Governments have responded with job creation programs and other measures to support workers during the crisis.
Maintaining a stable balance of payments ensures that a country's international trade is sustainable. The pandemic has disrupted global trade and caused a decrease in international tourism, leading to a decline in foreign currency reserves. Governments have implemented policies to address these challenges, such as increasing exports and reducing imports.
Overall, the pandemic has significantly affected the macroeconomic objectives of governments worldwide. Policy adjustments address the challenges posed by the crisis and promote economic recovery.
Explanation:
Ouestion 2
EloMax Company Ltd has carried out some research that shows that the business could
provide a standard service that it has recently developed. Provision of the service would
require investment in a machine that would cost GHé100,000, payable immediately. Sales of
the service would take place throughout the next five years. At the end of that time, it is
estimated that the machine could be sold for GH€20,000.
Inflows and outflows from sales of the service would be expected to be as follows:
Time
Immediately
1 years' time
2 years' time
3 years* time
4 years' time
5 years' time
5 years' time
Cost of machine
Operating profit before depreciation
Operating profit before depreciation
Operating profit before depreciation
Operating profit before depreciation
Operating profit before depreciation
Disposal proceeds from the machine
GHé000
(100)
20
40
60
60
20
20
EloMax Ltd has acceptable payback period of 3 years and expected returns on investment of
45%. It also uses straight-line method to depreciate fixed assets.
Advise the company whether or not to undertake the investment using the following appraisal
techniques:
a) Accounting Rate of Return (ARR)
[3marks]
b) Payback Period (PBP)
[3marks]
c) Net Present Value (NPV). Assume a discount rate of 10% per annum. I4marks]
Total marks 101
Since the ARR (4.8%) is below the expected return on investment (45%), the company should not undertake the investment.
How to solvea) Accounting Rate of Return (ARR)
ARR = (Average Annual Profit / Initial Investment) x 100
Average Annual Profit = (Operating Profit Before Depreciation - Annual Depreciation) * Years + Disposal Proceeds / Years
Annual Depreciation = (Initial Investment - Residual Value) / Years = (100,000 - 20,000) / 5 = 16,000
Average Annual Profit = (20+40+60+60+20 - 5*16,000) / 5 = 24,000 / 5 = 4,800
ARR = (4,800 / 100,000) x 100 = 4.8%
Since the ARR (4.8%) is below the expected return on investment (45%), the company should not undertake the investment.
The Payback Period (PBP), calculated as the amount of time taken to recuperate the primary investment, is two years in addition to sixty-seven hundredths of a year due to cumulative cash flows.
During the initial year, funds amounting to $20,000 were gained, increasing to $40,00 and then further expanding to $60,000 during consecutive periods.
Cumulative cash flows revealed that $80,000 was offset within the first year, followed by figures between negative-$40,000 and positive-$20,000 as future financial occurrences descended to greater proportions than past earnings.
Despite this discovery, an estimated PBP remained quantified at 2.67 years, thereby closely adhering to a prescribed period of three years for acceptable rates of return on such investments made by the company.
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Young Manufacturing uses the sum-of-the-years-digits method of depreciation. A piece of
heavy equipment costing $37,500 has an estimated life of five years and an estimated scrap
value of $2,700.
Refer to Young Manufacturing. Compute the amount of depreciation taken in the third year.
If Young Manufacturing uses the sum-of-the-years-digits method of depreciation. the amount of depreciation taken in the third year is $4640.
How to find the depreciation?Total years of useful life = 1 + 2 + 3 + 4 + 5
Total years of useful life = 15
Sum of digits = 1 + 2 + 3 + 4 + 5
Sum of digits = 15
Fraction of depreciation = Remaining years of useful life / Sum of digits
Fraction of depreciation = (5 - 3) / 15
Fraction of depreciation = 2 / 15
Depreciation expense = Total depreciable cost x Fraction of depreciation
Depreciation expense = (Cost - Scrap value) x Fraction of depreciation
Depreciation expense = ($37,500 - $2,700) x (2 / 15)
Depreciation expense = $4,640
Therefore the depreciation $4,640.
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What are costs called that are anticipated but may change from month to month. Examples may include entertainment, hobbies or certain educational expenses. a b O c Od medical costs. income costs. fixed costs. variable costs.
Answer: Varied (Variable) Costs
Explanation: Varied (Variable) costs are costs that change from month to month, hince the word "Varied" or "Variable" in it's name.
118 million Which of the following would never require reporting DTAs DTLS? Subscription received in advance b. An unrealized gain from recording investments at fair value Depreciation on equipment d. Interest from investments in municipal government bonds
Answer:
DTAs and DTLs account for differences between financial and tax reporting. Interest from investments in municipal government bonds is typically tax-exempt and would not require reporting of DTAs or DTLs.
Explanation:
Deferred tax assets (DTAs) and deferred tax liabilities (DTLs) are recorded to account for differences between the financial reporting and tax reporting of a company. DTAs and DTLs should be reported when a company is expected to receive a tax benefit or have a tax obligation in the future.
Of the options provided, interest from investments in municipal government bonds would never require reporting of DTAs or DTLs. This is because interest earned from investments in municipal bonds is typically exempt from federal income tax and, in some cases, state and local taxes as well. Therefore, there would be no difference between the financial reporting and tax reporting, and no need to report any DTAs or DTLs related to this investment.
On the other hand, subscription received in advance, an unrealized gain from recording investments at fair value, and depreciation on equipment may all require reporting of DTAs or DTLs depending on the specific circumstances of the company's financial and tax reporting.
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Which of the following plans generally identifies the basic
purpose of an organization?
(A) Competitive strategy
(B) Corporate policy
(C) Mission statement
(D) Long-range plan
Answer:
Explanation:
A mission statement is a concise statement that describes the fundamental purpose of an organization, including its key stakeholders, the products or services it provides, and the values that guide its operations. It is an essential component of an organization's strategic planning process and serves as a guiding principle for decision-making and goal-setting.
Competitive strategy refers to the methods and techniques that a company uses to gain a competitive advantage in the marketplace, while corporate policy refers to the rules and guidelines that govern an organization's operations. Long-range plans are strategic plans that extend several years into the future and outline an organization's goals and objectives over that time period.
Therefore, the answer is (C)- Mission statement
what are some good names for a animal trainer business
Some good names for a animal trainer business are:
Canine Mentors.Better Pups.The Pooch Whisperer.What is animal trainer business?Animal trainer business can be described as the business which involves the professional training of the animals in a way that they can related better with their owners.
It should be noted that this business is based on the process wwhereby the trainer will be paid some fee so that they can provide the training to the domestic animals such as dog cat as well as other domestic animals and this usually help to establish a smooth communication between them.
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2. Carson Inc.'s manager believes that economic conditions during the next year will be strong, normal, or weak, and she thinks that the firm's returns will have the probability distribution shown below. What's the coefficient variation for this firm’s returns??
Economic
Conditions Prob. Return
Strong 25% 30.0%
Normal 45% 12.0%
Weak 30% -14.0%
The coefficient variation for Carson Inc.'s returns is 4.06.
The coefficient of variation (CV) is a measure of relative dispersion or risk for a set of data. It is calculated as the standard deviation divided by the mean of the data, expressed as a percentage.
First, we need to calculate the expected return for Carson Inc.'s returns:
Expected return = (0.25 x 0.30) + (0.45 x 0.12) + (0.30 x -0.14) = 0.045 or 4.5%
Next, we need to calculate the standard deviation
Standard deviation = √((0.25 x (0.30 - 0.045)²) + (0.45 x (0.12 - 0.045)²) + (0.30 x (-0.14 - 0.045)²)) = 0.1828 or 18.28%
Finally, we can calculate the coefficient of variation
Coefficient of variation = standard deviation / expected return = 0.1828 / 0.045 = 4.06
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Through____, managers get to know employees and their work ethics, and they can determine which employees will help the business achieve its goals and meet its objectives
A.Planning
B.organizing
C.controlling
D.leading
Answer:
The answer is D. leading.
The debt-to-equity ratio:
Multiple Choice
Is a measure used to assess the risk of a company's financing structure.
Must be calculated from the market values of assets and liabilities.
Can always be calculated from information provided in a company's income statement.
Is calculated by dividing book value of secured liabilities by book value of pledged assets.
Is not relevant to secured creditors.
Answer: A
Explanation:
25
Select the correct answer.
Which question is likely to be asked by a life insurance company to determine the price of a policy?
OA.
OB.
O C.
O D.
OE.
Do you have any beneficiaries?
Do you have a current shot record?
Have you recently been out of the country?
Do you have a history of illness or other health conditions?
Have you recently purchased a vehicle?
The question that is likely to be asked by a life insurance company to determine the price of a policy is Do you have a history of illness or other health conditions?
What is life insurance?A life insurance policy can be described as the policy that is been made by the insuarance company which helps in the processs of providing financial protection for family if one is in a situation where he pass away.
It should be noted that the beneficiaries base on the policy will be able to hace access to the money so as to ensure security in a difficult time.
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A sample of 392 adult travelers were shown a list of 6
different ecolabels, and asked "How familiar are you with
this ecolabel, on a scale of 1 (not familiar at all) to 5 (very
familiar)." The mean and standard deviation of the responses for
each ecolabel are provided in the table. Which of the ecolabels.
had the most variation in numerical responses? Explain.
Ecolabel
value of the
Ecolabel
Energy Star
TripAdvisor Greenleaders
Audubon International
US Green Building Council
Green Business Bureau
Green Key
Mean
4.436
3.567
2.407
2.282
2.245
2.011
had the most variation in numerical responses because it has the
Std. Dev.
0.823
1.383
1.441
1.386
1.393
1.298
A sample of 392 adult travelers were shown a list of 6
different ecolabels, and asked "How familiar are you with
this ecolabel, on a scale of 1 (not familiar at all) to 5 (very
familiar)." The mean and standard deviation of the responses for
each ecolabel are provided in the table. Which of the ecolabels.
had the most variation in numerical responses? Explain.
Ecolabel
value of the
Ecolabel
Energy Star
TripAdvisor Greenleaders
Audubon International
US Green Building Council
Green Business Bureau
Green Key
Mean
4.436
3.567
2.407
2.282
2.245
2.011
had the most variation in numerical responses because it has the
Std. Dev.
0.823
1.383
1.441
1.386
1.393
1.298
Based on the information provided, the ecolabel with the most variation in numerical responses was TripAdvisor Greenleaders.
It has the largest standard deviation of the responses (Std. Dev. = 1.383).
A larger standard deviation means there is more variability or spread in the responses. The responses to TripAdvisor Greenleaders ranged from 1 to 5, showing a wider range compared to the other ecolabels.
Some key points to consider:
TripAdvisor Greenleaders has the highest standard deviation, so it has the most variability/spread in the responses.A standard deviation of 1.383 indicates the responses were fairly spread out over the range of values from 1 to 5.In contrast, ecolabels like Energy Star (Std. Dev. = 0.823) had more concentrated responses clustered around the mean.The means also provide context, showing TripAdvisor Greenleaders was less familiar on average compared to ecolabels like Energy Star.In summary, TripAdvisor Greenleaders exhibited the most variation in how familiar travelers were with that particular ecolabel. The range of responses, from 1 to 5, and the larger standard deviation supported this.
Please let me know if you need any clarification or have additional questions!
Maryann and Don want to open their own deli. To do so, Maryann must give up her job, where she earns $20,000 per year, and Don must give up his part-time job, where he earns $10,000 per year. They must liquidate their money market fund, which earns $1,000 interest annually. The rent on the building is $10,000 per year, and the expenses of such necessities as utilities, corned beef, and pickles are $35,000 annually. The minimum amount of revenue per year that would make it worthwhile, financially, for Maryann and Don to run the deli is _____
The minimum amount of income each year that would make it advantageous, monetarily, for Maryann and Wear to run the shop is $45,000.
The explicit cost incorporates installments made to providers and the costs which are caused while maintaining a business-like lease, wages, and daily material expenses.
Given that:
Earning per year Maryann = $20,000
Earning per year of Don = $10,000
Interest earned annually = $1,000
Rent of the building = $10,000
Expenses of necessities = $35,000
So by taking into account the above data, the express expense is
= Lease of the building + Costs of necessities
= $10,000 + $35,000
= $45,000
$45,000 costs are the expenses that are to be incurred for business expenses or other any purpose i.e. rent, salaries, etc.
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How does earning an A in an honors course benefit your GPA?
a
Honors course grades are weighted and keep your GPA from decreasing.
b
Honors course grades are weighted, increasing the points factored into your GPA.
c
Honors course grades are unweighted and keep your GPA from decreasing.
d
Honors course grades are unweighted, increasing the points factored into your GPA.
Answer:
i think its A
Explanation:
Calculate the company's current ratio as a percentage. Does the company have enough assets to pay its liabilities?
Current Ratio (in %) = 157.89473684211% rounded off to 157.89%.
The corporation has 157.89% more current assets than current liabilities, or 100%, according to the current ratio. To put it more simply, the corporation has $1.5789 in current assets to cover every $1 in current liabilities. The corporation therefore has sufficient current assets to cover its current liabilities.
The current ratio serves as a gauge for a company's liquidity. It is determined by dividing the company's current assets by its current liabilities. In order to express current ratio as a percentage,
We use the formula [Current Assets / Current Liabilities] / 100 is the current ratio. * 100 [30000 / 19000] is the current ratio (in%). * 100 Current Ratio (in%) = rounded to the nearest whole number, 157.89473684211%.
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1. Use each of the three terms below in a sentence that illustrates the
meaning of the term.
a. check clearing
b. bank holding
company
c. required reserve
ratio
a. Check clearing is the process by which banks exchange and settle checks, ensuring that the funds are transferred from the payer's account to the payee's account.
b. A bank holding company is a corporation that owns and controls one or more banks, but does not directly engage in banking activities itself.
c. The required reserve ratio is the minimum amount of funds that banks must hold as reserves, as a percentage of their customers' deposits, which is determined by the central bank or regulatory authority.
For example, when you deposit a check at your bank, the check clearing process begins, with your bank sending the check to the payer's bank to verify and transfer the necessary funds.
An example could be: XYZ Corporation is a bank holding company that owns and oversees three different banks, each offering various financial products and services to their customers.
To illustrate this, if the required reserve ratio is 10%, a bank with $1 million in customer deposits would need to maintain at least $100,000 in reserves to comply with regulations
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Using the percentage method for manual payroll systems with Forms W-4 from 2020 or later in Appendix C, determine the federal income tax withholding and calculate the net pay of the following employees. They are paid semimonthly.
C. Pare | Married, Filing Jointly, dependents < 12 = 2 | Pay $1,720
S. Lightfoot | Single, 1 Other dependents | Pay $3,265
The federal income tax withholding for C. Pare is $700.80, and the net pay is $159.20. Since the calculated federal income tax withholding exceeds the gross pay, the net pay for S. Lightfoot is negative. This is not possible, so there may be an error in the input data.
For C. Pare
Determine the gross pay for one pay period
$1,720 / 2 = $860
Calculate the annual salary
$860 x 24 = $20,640
Calculate the taxable income
$20,640 - (12,800 + 2,000) = $5,840
Find the appropriate tax bracket and calculate the federal income tax withholding
Taxable income falls in the 12% tax bracket for married filing jointly.
$5,840 x 0.12 = $700.80
Calculate the net pay
Gross pay - Federal income tax = Net pay
$860 - $700.80 = $159.20
Therefore, the federal income tax withholding for C. Pare is $700.80, and the net pay is $159.20.
For S. Lightfoot
Determine the gross pay for one pay period
$3,265 / 2 = $1,632.50
Calculate the annual salary
$1,632.50 x 24 = $39,180
Calculate the taxable income
$39,180 - (12,800 + 2,000 + 2,000) = $22,380
Find the appropriate tax bracket and calculate the federal income tax withholding
Taxable income falls in the 22% tax bracket for single filers.
($22,380 - $9,875) x 0.22 + $987.50 = $3,018.70
Calculate the net pay
Gross pay - Federal income tax = Net pay
$1,632.50 - $3,018.70 = -$1,386.20
Since the calculated federal income tax withholding exceeds the gross pay, the net pay for S. Lightfoot is negative. This is not possible, so there may be an error in the input data.
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demarco and tanya have received information about the separate mortgage offers. In two or three paragraphs describe your recommendation for the best financial choice in their situation.
There are a few fundamental elements to be kept in mind when assessing potential mortgage offers, which include:
How to make the recommendationInterest rate: This is one of the key components to ponder upon when evaluating different mortgages. A lower interest rate entails smaller monthly payments as well as a decrease in sum spent on interest overall during the duration of the loan.
Loan term: The length of the loan is another aspect that should not go unnoticed. When opting for a briefer loan, more money will be spent towards monthly payments but correspondingly less towards interest. However, if you desire a longer period, then the opposite is true with fewer monthly payments but expenditure on interest increases.
Closing costs: It is essential to take closing fees into consideration since they can end up reaching staggering heights. Closing costs refer to every single amount related to taking out a mortgage and ought to be given due thought before deciding on an offer.
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Suppose that the production of plastic creates a social cost which is depicted in the graph above. Without any government regulation, how much plastic will be produced?
Suppose that the production of plastic creates a social cost which is depicted in the graph above. Without any government regulation, the way that much plastic will be produced is option C: 650
What is the production about?Without some government managing, the production of plastic would likely resume until the private costs of result equal the private benefits of production.
However, because plastic result generates a social cost, the private costs of result do not reflect the brimming cost to society. Therefore, in the absence of management regulation, the result of plastic would likely continue at a level that surpasses the socially optimum level, resulting in overdone pollution and harm to wildlife.
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Explain how training can help develop entrepreneurial traits.
Entrepreneurial traits and training furnish people with the capacity to perceive business amazing open doors, confidence, information, and abilities to follow up on them.
Entrepreneurship development is the method for upgrading the information and ability of business visionaries through a few homerooms instructing projects and preparing. The central matter of the advancement cycle is to reinforce and build the number of business visionaries.
It assists them with teaching entrepreneurial skills. It is solely after preparing that they gain proficiency with these abilities and can perceive their capacities and begin contemplating building a business. They can match their character, abilities, and inventiveness with client needs and market open doors.
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discuss five engagement-specific controls to be instituted by an audit firm to ensure quality control
Answer:
The quality control policies and procedures applicable to a firm's accounting and auditing practice should encompass the following elements:
Independence, Integrity, and Objectivity.
Personnel Management.
Acceptance and Continuance of Clients and Engagements.
Engagement Performance.
Monitoring.
discuss five engagement-specific controls to be instituted by an audit firm to ensure quality control
The five key engagement-specific controls that an audit firm can implement to guarantee quality control throughout an engagement include adequate planning, risk assessment, supervision, documentation, and review.
These measures are taken to ensure the review is completed as per evaluating guidelines and that the ends came to are enough upheld by the accessible information. A survey likewise assists with guaranteeing that the review was completed as per inspecting norms.
Planning aids in characterizing the review's extension, laying out client assumptions, and successfully distributing assets and time. The foundation of fitting strategies to address potential dangers connected with the client's fiscal summaries is supported by risk appraisal.
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Suppose the price elasticity of supply for lumber is 2.4. If the price of lumber increases by 20% how much would the quantity supplied of lumber change
The quantity supplied of lumber would increase by 48% in response to a 20% increase in the price of lumber.
How to calculate by how much would the quantity supplied of lumber changeIf the price elasticity of supply for lumber is 2.4, then we can use the formula:
Elasticity of supply = percentage change in quantity supplied / percentage change in price
Solving for the percentage change in quantity supplied, we get:
Percentage change in quantity supplied = Elasticity of supply * Percentage change in price
Given that the price of lumber increases by 20%, the percentage change in price is 20%.
The percentage change in quantity supplied would be:
Percentage change in quantity supplied = 2.4 * 20% = 48%
Hence, the quantity supplied of lumber would increase by 48% in response to a 20% increase in the price of lumber.
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A new entrepreneur has come to you for advice about marketing a product. Specifically, she wants to understand the idea of a total product concept. How would you describe it to her and why do you think this concept is important?
Answer: The total product concept is a marketing strategy that aims to create a comprehensive and satisfying customer experience by considering all aspects of the product and related services.
Explanation: The total product concept goes beyond the physical product to include packaging, promotion, and service. It is an approach that seeks to create a complete and valuable experience for the customer. By considering all aspects of the product and its related services, companies can differentiate themselves from competitors and build customer loyalty. This approach recognizes that customers are not just buying a product, but also an entire experience that includes the purchase process, the customer service, and the ongoing relationship with the company.
Solomon Company is considering investing in two new vans that are expected to generate combined cash inflows of $34,500 per year. The vans’ combined purchase price is $98,000. The expected life and salvage value of each are seven years and $21,700, respectively. Solomon has an average cost of capital of 14 percent. (PV of $1 and PVA of $1)
Calculate the net present value of the investment opportunity.
Note: Negative amount should be indicated by a minus sign. Round your intermediate calculations and final answer to 2 decimal places.
Indicate whether the investment opportunity is expected to earn a return that is above or below the cost of capital and whether it should be accepted.
The net present value of the investment opportunity is $140,992.40. Since the net present value is positive, the investment opportunity is expected to earn a return that is above the cost of capital. Therefore, it should be accepted.
To calculate the net present value of the investment opportunity, we need to find the present value of cash inflows and cash outflows.
First, let's calculate the present value of cash inflows
PV of cash inflows = $34,500 × (PVA of $1, n=7, i=14%) = $34,500 × 4.685 = $161,682.50
Next, let's calculate the present value of cash outflows
PV of cash outflows = $98,000 - $21,700 × (PV of $1, n=7, i=14%) = $98,000 - $21,700 × 3.433 = $20,690.10
Now, let's calculate the net present value
Net present value = PV of cash inflows - PV of cash outflows = $161,682.50 - $20,690.10 = $140,992.40
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Discuss why positive thinking is critical in starting the entrepreneurship journey
Barans Company purchased merchandise on account from Springhill Company for $9,300, terms 2/10, n/30. Barans returned merchandise with an invoice amount of $1,500 and received full credit.
a. If Barans Company pays the invoice within the discount period, what is the amount of cash required for the payment? If required, round the answer to the nearest dollar.
Barans Company purchased $9,300 worth of merchandise from Springhill Company and received a credit of $1,500 for returned merchandise. If they pay the invoice within the discount period, they will need $9,114 in cash after deducting the discount amount.
If Barans Company pays the invoice within the discount period, they can take advantage of the 2% discount offered by Springhill Company. The invoice amount is multiplied by the discount rate to determine the discount amount.
Discount amount is calculated by multiplying the invoice amount by the discount rate.
Discount amount = $9,300 x 0.02
Discount amount = $186
The total amount of the payment can be calculated by subtracting the discount amount from the invoice amount.
Total payment = Invoice amount - Discount amount
Total payment = $9,300 - $186
Total payment = $9,114
Therefore, if Barans Company pays the invoice within the discount period, they will need $9,114 in cash to make the payment.
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Cardinal Company is considering a five-year project that would require a $2,915,000 investment in equipment with a useful life of five years and no salvage value. The company’s discount rate is 16%. The project would provide net operating income in each of five years as follows:
Sales $ 2,863,000
Variable expenses 1,014,000
Contribution margin 1,849,000
Fixed expenses:
Advertising, salaries, and other fixed out-of-pocket costs $ 781,000
Depreciation 583,000
Total fixed expenses 1,364,000
Net operating income $ 485,000
15. Assume a postaudit showed that all estimates (including total sales) were exactly correct except for the variable expense ratio, which actually turned out to be 45%. What was the project’s actual simple rate of return? (Round your answer to 2 decimal places.)
Answer:
The initial investment is $2,915,000. The annual net operating income is $485,000. The project's simple rate of return is the annual net operating income divided by the initial investment.
The variable expense ratio is 45%, which means that the variable expenses are $2,863,000 x 45% = $1,288,350.
The contribution margin is $2,863,000 - $1,288,350 = $1,574,650.
The fixed expenses are $781,000 + $583,000 = $1,364,000.
The net operating income is $1,574,650 - $1,364,000 = $210,650.
The simple rate of return is $210,650 / $2,915,000 = 7.22%.
Therefore, the project's actual simple rate of return is 7.22%.
