Calculate the economic value added of the proposed new line

Assignment Help Accounting Basics
Reference no: EM133035510

Question - Paula Boothe, president of the Cheyenne Corporation, has mandated a minimum 9% return on investment for any project undertaken by the company. Given the company's decentralization, Paula leaves all investment decisions to the divisional managers as long as they anticipate a minimum rate of return of at least 11%. The Energy Drinks division, under the direction of manager Martin Koch, has achieved a 12% return on investment for the past three years. This year is not expected to be different from the past three. Koch has just received a proposal to invest $1,834,000 in a new line of energy drinks that is expected to generate $314,000 in operating income. Assume that Cheyenne Corporation's actual weighted-average cost of capital is 11% and its tax rate is 32%.

Required - Calculate the economic value added of the proposed new line of energy drinks.

Reference no: EM133035510

Questions Cloud

Determine towson company net cash flows : Common Stock exchanged for outstanding Long Term Notes Payable of $125,000. Determine Towson Company Net Cash Flows from Operating Activities
Covid and retailers : COVID and Retailers: When COVID hit bricks and mortar retailers across the globe, many failed. Some did not. How did the successful companies change business mo
What amount of cash will each partner receive : The firm owes Kathryn $50,000. Upon liquidation, $450,000 is available for distribution to the partners. What amount of cash will each partner receive
What amount of cash will each partner receive : The firm owes Kathryn $50,000. Upon liquidation, $450,000 is available for distribution to the partners. What amount of cash will each partner receive
Calculate the economic value added of the proposed new line : Assume that Cheyenne Corporation's actual weighted-average cost of capital is 11%. Calculate the economic value added of the proposed new line
What is the concept of corporate social responsibility : 1. What is the concept of corporate social responsibility and how it can support the international management of the company?
Difference between technology now and in the past : 1) What's the difference between technology now and in the past? (At what time period was it different).
Analyze the sponsorship benefits for level : Using the internet as your primary resource, find a local (if possible) sponsorship package online for a charity event and address the following questions:
Four types of organizational cultures : What are the four types of organizational cultures identified by Fons Trompenaars? Provide a brief description of each of these cultures.

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.

  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!

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