The fun foods corp must decide on what new product line to

Reference no: EM13386898

The Fun Foods Corp. must decide on what new product line to introduce next year. After-tax cash flows are listed below along with initial investments. The firm's cost of capital is 12% and its target accounting rate of return is 20%. Assume straight-line depreciation and an asset life of five years. The corporate tax rate is 35%. All projects are independent.

Project Investment Year 1 2 3 4 5
A $5,000 $800 $1,000 $350 $1,250 $3,000
B $7,500 $1,250 $3,000 $2,500 $5,000 $5,000
C $4,000 $600 $1,200 $1,200 $2,400 $3,000

a. Calculate the accounting rate of return on the project. Which projects are acceptable according to this criterion? (Note: Assume net income is equal to after-tax cash flow less depreciation)
b. Calculate the payback period. All projects with a payback of fewer than 4 years are acceptable. Which are acceptable according to this criterion?
c. Calculate the projects' NPVs. Which are acceptable according to this criterion?
d. Calculate the projects' IRRs. Which are acceptable according to this criterion?

Reference no: EM13386898

Questions Cloud

Complement the business travel market : How do SMERF groups complement the business travel market?

Calculate the work that a person of mass 65kg must do to : calculate the work that a person of mass 65kg must do to climb betweencalculate the work that a person of mass 65kg

Equal volumes of water density 100gml and ethyl alcohol : equal volumes of water density 1.00gml and ethyl alcohol density 0.789gml are combined. if the total volume is 190 of

What is the percent yield of a reaction in which 212 g : what is the percent yield of a reaction in which 212 g phosphorus trichloride reacts with excess water to form 137 g

The fun foods corp must decide on what new product line to : the fun foods corp. must decide on what new product line to introduce next year. after-tax cash flows are listed below

A gold bar weighing 335g and having an initial temperature : a gold bar weighing 33.5g and having an initial temperature of 25.0 degrees celsius absorbs 5000 joules of heat. what

A sample of an unknown gas effuses in 105 min an equal : a sample of an unknown gas effuses in 10.5 min. an equal volume of h2 in the same apparatus under the same conditions

Which of the following statements would a follower of adam : which of the following statements would a follower of adam smith be most likely to make? the federal government should

Suppose that a sample of gas occupies 73 ml of volume at : suppose that a sample of gas occupies 73 ml of volume at 25c and a pressure of 266 torr. what would be the volume if

User Account

All Pages