Here are more questions i would like you to review for me and please can i have

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Here are more questions i would like you to review for me and please can i have the explanation behind them so i can study them , thank you :)


(Ignore income taxes in this problem.) Pare Long-Haul, Inc. is considering the purchase of a tractor-trailer that would cost $104,520, would have a useful life of 6 years, and would have no salvage value. The tractor-trailer would be used in the company's hauling business, resulting in additional net cash inflows of $24,000 per year. The internal rate of return on the investment in the tractor-trailer is closest to:



a. 10%

b. 8%

c. 13%

d. 11%

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(Ignore income taxes in this problem.) The management of Crail Corporation is considering a project that would require an initial investment of $51,000. No other cash outflows would be required. The present value of the cash inflows would be $60,180. The profitability index of the project is closest to:



a. 0.18

b. 0.82

c. 1.18

d. 0.15


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A project profitability index greater than zero for a project indicates that:



a. the discount rate is less than the internal rate of return.

b. there has been a calculation error.

c. the project is unattractive and should not be pursued.

d. the company should reevaluate its discount rate.



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Venanzi Air uses two measures of activity, flights and passengers, in the cost formulas in its budgets and performance reports. The cost formula for plane operating costs is $40,720 per month plus $2,646 per flight plus $11 per passenger. The company expected its activity in September to be 62 flights and 288 passengers, but the actual activity was 64 flights and 289 passengers. The actual cost for plane operating costs in September was $214,430. The activity variance for plane operating costs in September would be closest to:



a. $6,490 U

b. $5,303 F

c. $6,490 F

d. $5,303 U



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Explanation / Answer

1. IRR = IRR(CFs) = IRR(-104520,24000,24000,24000,24000,24000,24000) = 10.00% ..ans (a) 2. The profitability index of the project = PV of CFs/Initial Inv = 60180/51000 = 1.18 ....Ans (c) 3. d. the company should reevaluate its discount rate. 4. Materials quantity variance (MQV) Formula: [Materials quantity variance = (Actual quantity used × Standard price) - (Standard quantity allowed × Standard Price)] ie MQV = (214430) - (40720+62*2646+288*11) = $6,490F ..........Ans (c)

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