(a) 2. xercise 195 The Deluxe Division, a profit center of Riley Manufacturing C

Question

(a)

2.

xercise 195

The Deluxe Division, a profit center of Riley Manufacturing Company, reported the following data for the first quarter of 2016:

(a)

Prepare a performance report for the manager of the Deluxe Division.

1.Vista Company is considering two new projects, each requiring an equipment investment of $97,000. Each project will last for three years and produce the following cash inflows:
Year Cool Hot 1 $38,000 $42,000 2 43,000 42,000 3 48,000 42,000 129,000 $126,000
The equipment will have no salvage value at the end of its three-year life. Vista Company uses straight-line depreciation and requires a minimum rate of return of 12%.

Present value data are as follows:
Present Value of 1 Period 12% 1 .893 2 .797 3 .712 Present Value of an Annuity of 1 Period 12% 1 .893 2 1.690 3 2.402

Explanation / Answer

2)

cool hot Present value of cash inflows = (.893*38000)+(43000*.797)+(48000*.712) (.797+.893+.712)* 42000 = 33934+ 34271+ 34176= 102381 100884 NPV =Present value -II 102381-97000= 5381 100884-97000= 3884

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