Chanter 13 1. Special Order Decision (accept or roject) We could accept a specia

ID: 2584120 • Letter: C

Question

Chanter 13 1. Special Order Decision (accept or roject) We could accept a special incomedditonalor at $50 per unit for 10,000 units. Our Variable costs are would be $130,000, By accepting this special order would increase by? 2. Drop a Division Decision (continue or discontinue) Jones Division has the following i income statement: Sales 20,000 C. F. C Net Loss 5,000 15,000 S(5,000) Division, we could save 60% of the Fixed Costs. Should we Division? How much would overall net income go up or down by if we If we discontinue the Jones did droes o 3. A box costs $30 to make. If we sell the box at cost plus 30%, what would the selling price be for a box? Chapter 14 1. Use the following table for this question: Present Value of an Annuity 0%-- 9% | 10% 926 917 909 21.783 1.759 1.736 2.577 2.531 2.487 Periods A company has a minimum required rate of return of 8% and is considering investing in a project that costs $200,000 and is expected to generate cash inflows of $80,000 at the end of each year for three years. The net present value of this project is: 2. Payback period - What would the cash payback period be if you have purchased an asset with a cost of $100,000 and annual net cash inflows of $20,000 per year?

Explanation / Answer

Present Value of Cash Inflow = PVAF of required rate * Cash Inflow

NPV = Present Value of Cash Inflows – Initial Cash Outflow

10%

Initial Cash Outflow

$200,000

PVAF for 3 Years

2.577

2.531

2.487

Cash Inflow per year

$80,000

Present Value of Cash Inflow

206,160

(80,000 * 2.577)

202,480

(80,000 * 2.531)

198,960

(80,000 * 2.487)

NPV

6,160

2,480

(1,040)

10%