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Drupady [299]
2 years ago
8

Englewood Company has an opportunity to produce and sell a revolutionary new smoke detector for homes. To determine whether this

would be a profitable venture, the company has gathered the following data on probable costs and market potential:
New equipment would have to be acquired to produce the smoke detector. The equipment would cost $100,000 and be useable for 12 years. After 12 years, it would have a salvage value equal to 10% of the original cost.
Production and sales of the smoke detector would require a working capital investment of $40,000 to finance accounts receivable, inventories, and day-to-day cash needs. This working capital would be released for use elsewhere after 12 years.
An extensive marketing study projects sales in units over the next 12 years as follows:
Year Sales in Units
1……………. 4,000
2……………. 7,000
3……………. 10,000
4-12………… 12,000
The smoke detectors would sell for $45 each; variable costs for production, administration, and sales would be $25 per unit.
To gain entry into the market, the company would have to advertise heavily in the early years of sales. The advertising program follows:
Amount of Yearly
Year Advertising
1-2…………. $70,000
3…………… $50,000
4-12……….. $40,000
Other fixed costs for salaries, insurance, maintenance, and straight-line depreciation on equipment would total $127,500 per year. (Depreciation is based on cost less salvage value.)
The company’s required rate of return is 20%
Required:
Compute the net cash inflow (cash receipts less yearly cash operating expenses) anticipated from the sale of the smoke detectors for each year over the next 12 years.
Using the data computed in (1) above and other data provided in the problem, determine the net present value of the proposed investment. Would you recommend that Englewood Company accept the smoke detector as a new product?
Business
1 answer:
Alchen [17]2 years ago
8 0

Answer:

1) Compute the net cash inflow (cash receipts less yearly cash operating expenses) anticipated from the sale of the smoke detectors for each year over the next 12 years.

year              net cash flow

0                   -$140,000

1                    ($20 x 4,000) - $70,000 - $127,500 + $7,500 = -$110,000

2                   ($20 x 7,000) - $70,000 - $127,500 + $7,500 = -$50,000

3                   ($20 x 10,000) - $50,000 - $127,500 + $7,500 = $30,000

4                   ($20 x 12,000) - $40,000 - $127,500 + $7,500 = $80,000

5                   ($20 x 12,000) - $40,000 - $127,500 + $7,500 = $80,000

6                   ($20 x 12,000) - $40,000 - $127,500 + $7,500 = $80,000

7                   ($20 x 12,000) - $40,000 - $127,500 + $7,500 = $80,000

8                   ($20 x 12,000) - $40,000 - $127,500 + $7,500 = $80,000

9                   ($20 x 12,000) - $40,000 - $127,500 + $7,500 = $80,000

10                  ($20 x 12,000) - $40,000 - $127,500 + $7,500 = $80,000

11                   ($20 x 12,000) - $40,000 - $127,500 + $7,500 = $80,000

12                  ($20 x 12,000) - $40,000 - $127,500 + $7,500 + $40,000 +

                    $10,000 = $130,000

2) Using the data computed in (1) above and other data provided in the  problem, determine the net present value of the proposed investment.

using a financial calculator, the NPV = -$56,801.13

3) Would you recommend that Englewood Company accept the smoke detector as a new product?

Since the NPV is negative, the project should be rejected.

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Answer:

The correct answer is the option D: share information to find a mutual solution.

Explanation:

To begin with, the concept known as "Supplier Satisfaction" has long been a dead term for many companies in all the industries, however very recently the acquisition of this method has been implemeted in order to increase the benefits that it brings to understand better the relationship with the costumer. Moreover, the model itself seeks for the proper creation of a high quality relationship established in communication between the costumer and the supplier who is able to make a confortable sale and create and environment suitable for the buyer. That is why that the correct action will be to share information in order to find a mutual solution in the case where the situation is in that desirable region of the matrix.

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1 year ago
Andrew has been asked to estimate future cash flows for his company. He is having a hard time remembering how to estimate future
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7 0
1 year ago
You are a Director in the Andrews Corporation. Your boss called you to inform you that there is a proposed layoff in your depart
Luden [163]

Answer:

Making sure that Shelia understands the economic need for laying-off staff.

Explanation:

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The key takeaway when communicating things related to lay-offs is the distinction between <em>lay-offs</em> and <em>employee firing due to bad performance</em>. Lay-offs are never the result of an individual's bad performance or mistakes regarding work, instead, they are always related to business issues, such as mandatory downsizing. All in all, lay-offs are always about <em>economic issues </em>regarding the business.

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6 0
2 years ago
Read 2 more answers
TH Manufacturers expects to generate cash flows of $129,600 for the next two years. At the end of the two years the business wil
arsen [322]

Answer:

Vo  = <u>C1  </u>    +        <u>C2 + V2</u>

        1 + k              (1 + K)2

Vo = <u>$129,600  </u> +   <u>$129,600 + $3,200,000</u>

        1 + 0.14            (1 + 0.14)2

Vo = $113,684.21  + $2,562,019.08

Vo = $2,675,703.29

The correct answer is C

Explanation:  

The current value of the business equals cashflow in year 1 divided by 1 + K plus the aggregate of cashflow and sales value in year 2 divided by 1 + k raised to power 2.

7 0
1 year ago
On January 1, 2012, Browning Corporation had 75,000 shares of $1 par value common stock issued and outstanding. During the year,
Gennadij [26K]

Answer:

The solution are given as under:

Explanation:

Part 1. The entry would record common stock at part and the above par value would be paid in capital.

Dr Cash $675,000

Cr Common Stock $60,000

Cr Paid In Capital   $615,000

Part 2. When dividend is declared, dividend payable must be recognized against the Retained Earnings.

Dividends Payable can be calculated by finding out the total shares on 15th of June, which is:

Total shares = Shares issued + Previously Held shares

= 75,000 + 60,000 = 135,000

Now the total dividend that is payable is:

Dividend Declared = Total Number of Shares * Dividend per share

= 135,000 Shares * $2 per share = $270,000

Dr Retained Earnings $270,000

Cr Dividend Payables $270,000

Part 3. The payment of dividends will decrease the dividend payables with $270,000, so the double entry would be:

Dr Dividend Payables $270,000

Cr Cash Account                 $270,000

Part 4. The purchasing of the treasury stock would be recorded as under:

Dr Treasury Stock $90,000 ..... $15 per share * 5000 shares

Cr Cash Account          $90,000

Part 5. The cash dividend declared would be similarly the way we calculated in the part 3 but here we will also account for the treasury stock as under:

Total shares = Shares issued + Previously Held shares - Treasury Stock

= 75,000 + 60,000 - 5,000 = 130,000

Now the total dividend that is payable is:

Dividend Declared = Total Number of Shares * Dividend per share

= 130,000 Shares * $2.5 per share = $325,000

Dr Retained Earnings $325,000

Cr    Dividend Payables $325,000

5 0
1 year ago
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