Compute the project simple rate return

Assignment Help Cost Accounting
Reference no: EM132562345

Net Present Value Analysis and Simple Rate of Return:

Derrick Iverson is a divisional manager for Holston Company. His annual pay raises are legally determined by his division's return on investment (ROI), which has been above 20% each of the last three years. Derrick is considering a capital budgeting project that would require a $3,000,000 investment in equipment with a useful life of five years and no salvage value. Holston Company's discount rate is 15%.

The project would provide net operating income each year for five years as follows:

Sales: $2,500,000

Variable Expenses: 1,000,000

Contribution Margin: 1,500,000

Fixed Expenses:

Advertising, Salaries, and Other Fixed

out- of Pocket Costs $600,000

Depreciation 600,00

Total Fixed Expenses 1,200,000

Net Operating Income $300,000

Question 1: Compute the Project's Net Present Value.

Question 2: Compute the Project's Simple Rate Return.

Question 3: Would the company want Derrick in pursue this investment opportunity? Would Derrick be inclined to pursue this investment opportunity? Explain.

Reference no: EM132562345

Questions Cloud

Prepare the adjusting entry needed at the end of the year : At the end of the year, a physical count of supplies showed $1,475 of supplies on hand. Prepare the adjusting entry needed at the end of the year
Maternal health encompasses the health of women : Maternal health encompasses the health of women in the childbearing years, including those in the pre-pregnancy period, those who are pregnancy,
What is the classified statement of financial position : Sparrow Company had the following adjusted trial balance at December 31, 2018. What is the classified statement of financial position for Sparrow at December
What is the eps for each plan : If EBIT is $925,000, what is the EPS for each plan? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)
Compute the project simple rate return : Compute the Project's Simple Rate Return. Derrick Iverson is a divisional manager for Holston Company. Compute the Project's Net Present Value.
Explain the different parts of medicare : Explain the different parts of Medicare. One of your Medicare clients also requires custodial care not skilled nursing care.
What is the annual interest rate on the notes payable : If the notes payable have been outstanding since January 1 of the current year, what is the annual interest rate on the notes payable
Do agree with mr jerry comments : Do you agree with Mr. Jerry comments? Explain your answer. Suggest how Mr. Tarmizi should proceed with the adoption of activity based costing system.
Which product should the company emphasize : If annual demand for all products is more than the company can produce next year, which product should the company emphasize?

Reviews

Write a Review

Cost Accounting Questions & Answers

  Calculate the markup percentage on the total cost

Calculate the markup percentage on the total cost per training session. Determine the total cost per training session. Determine the desired ROI per training

  Explain the value of cost classifications

Conduct some research to explain the value of cost classifications for Mal Ltd. and how this may assist Mr and Mrs Long in improving their decision-making processes.

  Difference between standard cost and standard costing

Explain and illustrate the difference between standard cost and standard costing and using the above data draw up a standard cost card under marginal and absorption costing.

  Bad debts expense for lufkin for fiscal 2008

Prepare the journal entries necessary to record the credit sales, collections on account, write-off of accounts receivable, and the bad debts expense for Lufkin for fiscal 2008.

  Prepare the manufacturing overhead budget for the year

Prepare the manufacturing overhead budget for the year, showing quarterly data - Atlanta Company is preparing its manufacturing overhead budget for 2012.

  1 at the end of the year a corporation has a balance in

1. at the end of the year a corporation has a balance in allowance for uncollectible accounts of 230 credit before any

  Prepare the 20x3 and 20x4 journal entries for magenta

Prepare the 20X3 and 20X4 journal entries for Magenta for the above transactions. Assume that Magenta does not have significant influence.

  Find and provide would be adjusted directly against equity

Find and Provide some examples of items that would be adjusted directly against equity, rather than being included as part of profit or loss.

  Overhead rates were based on normal monthly capacity

Normal levels due to the effects of a labor strike that occurred during union contract negotiations. Once the dispute was settled, the company scheduled overtime to try to catch up to regular production levels. The following costs were incurred in..

  Investigation of customer complaints

Physical access controls-only authorized employees should have physical access to the Warehouse and Shipping areas - Prompt investigation of customer complaints about shorted shipments

  How much will you charge for your product or service

How much will you charge for your product or service? How many units of the product or service do you anticipate being able to sell over the first year?

  Question 1the whitton co has an opportunity to purchase a

question 1the whitton co. has an opportunity to purchase a computer now for pound18000 that will yield annual net cash

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