Jack is considering adding toys to his general store. He estimates the cost of toy inventory will be $4,200. The remodeling and
shelving costs are estimated at $1,500. Toy sales are expected to produce net annual cash inflows of $1,200, $1,500, $1,600, and $1,750 over the next four years, respectively. Should Jack add toys to his merchandise if he requires a three-year payback period
1 answer:
Answer:
No. The payback period is 3.8 years
Explanation:
The payback period measures how long it takes for the amount invested in a project to be recovered from the cumulative cash flows.
The amount invested = $4,200 + $1,500 = $5,700
Please check the attached image for an explanation on how the payback period was calculated.
Pay back period = 3 years + 1400/1750 = 3.8 years.
3.8 years is greater than the required 3 years Payback period. Therefore, Jack shouldn't accept the project.
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Answer:
(a) It will take Jones 25 hours to produce a finished book of 150 pages
(b) The marginal cost of the 150th page of the finished book is $4
The marginal cost of the 300th page of the finished book is $8
Explanation:
q= =
q = the number of pages in the finished book
S = the number of working hours spent by Smith
J = the number of hours spent working by Jones.
For first draft, smith works for 900 hours at $3 per working hour
q =
q= ×
q = 30 ×
=
, squaring both sides we have,
()² = J
(a) Since Jones has to produce a book of 150 pages and Smith worked 900 hours on it,
q = 150, S = 900 , J = ?
J = ()² = 5²
J = 25
Therefore, it would take 25 hours for Jones to produce a book of 150 pages.
(b) ()² = J
Since Smith worked for 900 hours at $3 per working hour, his total cost of work is = 900 × $3 = $2,700.
Jones total cost of work at $12 per working hour = $12J
Total cost of work, C = $2,700 + $12J
C = $2,700 + $12()²
Marginal cost, MC =
= [$2,700 + $12(
)²]
=
if q = 150, MC =
= $4
if q = 300, MC = = $8