User Account

All Pages

Calculate the Accrual Accounting Rate of Return

Assignment Help Accounting Basics
Reference no: EM132596956

Question - GH Company has been offered a seven-year contract to supply a part for the government. After careful study, the company has estimated the following data relating to the contract:

Cost of Equipment Needed $300,000

Working Capital Needed 50,000

Annual Cash Receipts from the Delivery of Parts 100,000

Annual Cash Operating Costs 30,000

Salvage Value of Equipment at Termination of the Contract 5,000

It is not expected that the contract would be extended beyond the initial contract period. The company's discount rate is 10%. (Ignore income taxes in this problem.)

Required -

1) Use the net present value method to determine if the contract should be accepted. Round all computations to the nearest dollar.

2) Use the payback method to determine if the contract should be accepted. Assume GH Company requires a four-year payback period.

3) Calculate the Accrual Accounting Rate of Return.

4) Given your calculations, should GH Company accept the contract?

Reference no: EM132596956

Questions Cloud

What is the Net Present Value of the investment : A new mall in the City of Cape Town has just opened. What is the Net Present Value of the investment with a 10% per annum discount rate
How risk management should be practiced through each stage : Identify how risk management should be practiced through each stage of the project.
What conclusions concerning the management of cash : Based on the information contained in Coca-Cola's and PepsiCo's financial statements, What conclusions concerning the management of cash
Analyze asymmetric and symmetric encryption : Analyze asymmetric and symmetric encryption. Evaluate the differences between the two of them and which one that you would determine is the most secure
Calculate the Accrual Accounting Rate of Return : GH Company has been offered a seven-year contract to supply a part for the government. Calculate the Accrual Accounting Rate of Return
Provide Dr No with an analysis of the income : Required - Provide Dr. No with an analysis of the income that he must report in 2018 as a result of these activities
What amounts of cash provided by operating activities : What method does PepsiCo use? What were the amounts of cash provided by operating activities reported by Coca-Cola and PepsiCo in 2014
Explain the limitation of wacc measurement : Discuss the factors that might affect the accuracy of the WACC measurement. Explain the limitation of WACC measurement. Calculate the company's WACC.
What is the ending inventory value at cost : Sales during the current year totaled $2780000, and net markups (markdowns) were $61000 ($97000). What is the ending inventory value at cost

Reviews

Write a Review

Accounting Basics Questions & Answers

  How much control does fed have over this longer real rate

Hubbard argues that the Fed can control the Fed funds rate, but the interest rate that is important for the economy is a longer-term real rate of interest.   How much control does the Fed have over this longer real rate?

  Coures:- fundamental accounting principles

Coures:- Fundamental Accounting Principles: - Explain the goals and uses of special journals.

  Accounting problems

Accounting problems,  Draw a detailed timeline incorporating the dividends, calculate    the exact Payback Period  b)   the discounted Payback Period. the IRR,  the NPV, the Profitability Index.

  Theory of interest - term structure of interest rates

Term Structure of Interest Rates

  Write a report on internal controls

Write a report on Internal Controls

  Prepare the bank reconciliation for company

Prepare the bank reconciliation for company.

  Cost-benefit analysis

Create a cost-benefit analysis to evaluate the project

  Theory of interest

Theory of Interest: NPV, IRR, Nominal and Real, Amortization, Sinking Fund, TWRR, DWRR

  Liquidity and profitability

Distinguish between liquidity and profitability.

  What is the expected risk premium on the portfolio

Your Corp, Inc. has a corporate tax rate of 35%. Please calculate their after tax cost of debt expressed as a percentage. Your Corp, Inc. has several outstanding bond issues all of which require semiannual interest payments.

  Simple interest and compound interest

Simple Interest, Compound interest, discount rate, force of interest, AV, PV

  Capm and venture capital

CAPM and Venture Capital

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd