Holdt Inc. produces and sells a single product. The selling price of the product
ID: 2779504 • Letter: H
Question
Holdt Inc. produces and sells a single product. The selling price of the product is $110.00 per unit and its variable cost is $70 per unit. The fixed expense is $160,000 per month. The break-even sales (units) is:
4,000
5,500
6,500
2,500
The management of Indiana Corporation is considering the purchase of a new machine costing $400,000. The company's desired rate of return is 10%. The present value factors for $1 at compound interest of 10% for 1 through 5 years are 0.909, 0.826, 0.751, 0.683, and 0.621, respectively. In addition to the foregoing information, use the following data in determining the acceptability of this investment:
Year
Income fromOperations
Net Cash
Flow
1
$100,000
$180,000
2
60,000
120,000
3
30,000
100,000
4
10,000
90,000
5
10,000
90,000
The average rate of return for this investment is
18%
21%
53%
10%
Using the following partial table of present value of $1 at compound interest, the present value of $15,000 to be received 3 years hence with earnings at the rate of 6% a year is
Year
6%
10%
12%
1
0.943
0.909
0.893
2
0.890
0.826
0.797
3
0.840
0.751
0.712
4
0.792
0.683
0.636
$12,600
$11,880
$13,350
$11,265
Below is a table for the present value of an annuity of $1 at compound interest.
Year
6%
10%
12%
1
0.943
0.909
0.893
2
1.833
1.736
1.690
3
2.673
2.487
2.402
4
3.465
3.170
3.037
5
4.212
3.791
3.605
Using the tables above, what would be the present value of $25,000 (rounded to the nearest dollar) to be received 4 years from today, assuming an earnings rate of 10%?
$19,800
$17,075
$79,250
$15,525
4,000
5,500
6,500
2,500
Explanation / Answer
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Selling price of product 110 Less: Variable Cost 70 Contribution p.u. 40 Fixed Cost 1,60,000 Break Even Sales (Fixed Cost/Contribution) 4,000Related Questions
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