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kupik [55]
2 years ago
14

Sister Pools sells outdoor swimming pools and currently has an aftertax cost of capital of 11.6 percent. Al's Construction build

s and sells water features and fountains and has an aftertax cost of capital of 10.3 percent. Sister Pools is considering building and selling its own water features and fountains. The sales manager of Sister Pools estimates that the water features and fountains would produce 20 percent of the firm's future total sales. The initial cash outlay for this project would be $85,000. The expected net cash inflows are $17,000 a year for 7 years. What is the net present value of the Sister Pools project?
Business
1 answer:
pentagon [3]2 years ago
3 0

Answer:

NPV -6,422.07908

The investment is not profitable at current cost of capital os 11.6%

Explanation:

Sister Pools 11.6% after tax cost of capital

Contructions 10.3% after tax cost of capital

- 85,000

cash flow 17,000 for next 7 years

<u>We will calculate the present value of a 7-years annuity of 17,000 at 11.6% </u>rate

<em>We use Sister Pools rate because we are asked for this company and there is no indication about a change in the cost of capital condition.</em>

<em />

C \times \frac{1-(1+r)^{-time} }{rate} = PV\\\\\\\\17,000 \frac{1-(1+0.116)^{-7} }{0.116} = PV\\

PV = 78,577.92092

<u>Next we subtract the investment cost to get the Net Present Value</u>

78,577.92092 - 85,000 = -6,422.07908

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Answer: Avoiding use of green/environmentally-friendly materials (which are of lower quality than superior materials)

Explanation:

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Footware with high quality materials that are durable rank high in the S/Q matrix and as such it is imperative that companies aiming to move higher up the S/Q scale, use high quality materials.

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2 years ago
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Explanation:

Because it makes even more sense.

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2 years ago
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Option A

<u>Explanation: </u>

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4 0
2 years ago
All About Animals has two product​ lines: Cat food and Dog food. Contribution margin income statement data for the most recent y
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Answer:

Increase in operating income by $12,000

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The above is an incomplete question because the value for 'space normally used to produce the rented line' is missing. However, I assumed the value is $26,000 per year as gotten from the internet -Chegg.

Given the above information, the operating income can be affected as calculated below;

Sales revenue $85,000

Add additional revenue $26,000

Total revenue $11,1000

Less: variable expenses ($40,000)

Contribution margin $71,000

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7 0
2 years ago
Maryland Incorporated produces toys. Total manufacturing costs are​ $360,000 when​ 50,000 toys are produced. Of this​ amount, to
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Answer:

$458,000                

Explanation:

The computation of the total production cost in case of 85,000 toys are produced

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= $458,000                                                                                

5 0
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