Answer:
Increase profits by $40,000
Explanation:
The computation of the net impact of stopping production of love seats is shown below:
= Contribution margin × increased percentage - segment margin
= $900,000 × 10% - $50,000
= $90,000 - $50,000
= $40,000
Since the amount comes in positive which means that the profits is increased by $40,000
All other information which is given is not relevant. Hence, ignored it
Answer:
<u>Monopolist competition</u>.
Explanation:
The market structure of monopolistic competition occurs when there are several companies offering similar products, which even though substitute products cannot be considered perfect substitutes. Monopolistic competition is characterized when in the market there are many sellers competing for a higher market position of some product or sector. This type of monopolistic competition is characterized by free entry to other companies, which makes it increasingly competitive in the pursuit of customer preference.
Answer:
A. Take $1 million now.
Explanation:
A. If we take $1 million now the present value of the money is $1 million.
B. If we choose to take $1.2 million paid out over 3 years then present value will at 10% will be;
$300,000 + $300,000 / 1.2 + $300,000/ 1.44 + $300,000 / 1.728
$300,000 + $250,000 + $208,000+ $173,611 = $931,944
The present value of option B is less than present value of option A. We should select option A and take $1 million now.
Answer:
a. NOPAT = EBIT * (1-t)
NOPAT = $2,700 * (1-0.40)
NOPAT = $1,620
b. OCF = NOPAT + Depreciation
OCF = $1,620 + $1,600
OCF = $3,220
c. FCF = Net fixed asset investment - Net current asset investment
FCF = $3,320 - $1,400 - $1,400
FCF = $420
Note:
Net fixed asset investment = Change in net fixed assets + depreciation
= ($14,800- $ 15,000) + $1,600
= $1,400
Net current asset investment = Change in current assets - Change in accounts payable and accurals
= ($8,200 - $6,800) - {($1,600 + $200) - ($1,500 - $300)}
= $1,400
d. FCF is meaningful as it shows that OCF is able to cover Operating expenses as well as Investment in Fixed and Current Assets
Answer:
Project 1, 2 and 3 should be rejected.
Explanation:
This problem required us to tell which project we should not accept. To solve this we have to apply this rule that is accept the project with positive NPV.
The detail calculation are given below.
The discount factors to be used for CFO, CF1, CF2 and CF3 is 1, 0.74, 0.55 and 0.41 respectively. It is calculated by using following formula.
DF= (1 + i)^-n (n is period and i is 35%)
So now calculating NPV of each project by multiplying cashflow with discount factor.
Project 1 = -100+ (50*0.74 ) + (50*0.55) + (50*0.41) = -15 M dollars
Project 2 = -80 + (40*0.74) + (45*0.55) + (50*0.41) = -5.15 M dollars
Project 3 = -70 + (30 *0.74) + (40*0.55) + (50*0.41) = -5.3 M dollars
Project 4 = -60 + (30 *0.74) + (40*0.55) + (60*0.41) = 8.8 M dollars
Project 5 = -50 + (25 *0.74) + (30*0.55) + (70*0.41) = 13.7 M dollars