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- Gemilang Berhad is considering which of two mutually exclusive projects it should undertake as its investment in the month of February 2019. The finance director thinks that the project with the higher Net Present Value (NPV) should be chosen whereas the managing director thinks that the one with the shorter payback period should be taken. As a management accountant, you are given with the followings projected profit: Project Initial cost AA (RM) (70,000) 15,000 ZZ (RM) (60,000) Year 1 20,000 Year 2 18,000 25,000 Year 3 20,000 32,000 18,000 Year 4 Year 5 Notes: All cash flows take place at the end of the year apart from the original investment in the project which takes place at the beginning of the project. 1. Project AA machinery is to be disposed of at the end of year 5 with a scrap value of RM10,000. 2. 3. Project ZZ machinery is to be disposed at the end of year 3 with a nil scrap value. 4. Gemilang Berhad's policy is to depreciate its assets on a straight line basis. 5. The…The Weiland Computer Corporation is trying to choose between the following mutually exclusive design projects, P1 and P2:Year 0123 Cash flows (P1) -$53,000 27,000 27,000 27,000 Cash flow (P2) -$16,000 9,100 9,100 9,100a. If the discount rate is 10 percent and the company applies the profitability index (PI) decision rule, which project should the firm accept?b. If the firm applies the Net Present Value (NPV) decision rule, which project should it take?c. Are your answers in (a) and (b) different? Explain why?The following selected data pertain to Badang Company's Jaja Division for 2021: Sales Variable costs Traceable fixed costs Average invested capital Imputed interest rate P1,000,000 600,000 100,000 200,000 15% How much is the return on investment? 200% 75% 135% 150%
- The following information is provided. Project Income Investment A P33,000 P300,000 B P56,250 P750,000 C P27,500 P550,000 Assume the division's current ROI is 10% and the firms minimum required rate of return is 7%. If you were the president of the company, which projects would you want the division manager to accept? a. A, B and C b. A and C c. A and B d. A only e. B only.All parts are under one question, per your policy all parts can be answered. 3. Analysis of an expansion project Companies invest in expansion projects with the expectation of increasing the earnings of its business. Consider the case of Yeatman Co.: Yeatman Co. is considering an investment that will have the following sales, variable costs, and fixed operating costs: Year 1 Year 2 Year 3 Year 4 Unit sales 3,000 3,250 3,300 3,400 Sales price $17.25 $17.33 $17.45 $18.24 Variable cost per unit $8.88 $8.92 $9.03 $9.06 Fixed operating costs $12,500 $13,000 $13,220 $13,250 This project will require an investment of $15,000 in new equipment. Under the new tax law, the equipment is eligible for 100% bonus deprecation at t = 0, so it will be fully depreciated at the time of purchase. The equipment will have no salvage value at the end of the project’s four-year life. Yeatman pays a constant tax rate of 25%, and it has a weighted average cost of…The management of Bhytyu Limited are considering several mutually exclusive projects with characteristics as shown in the following table. Project A B C D E Initial Cost ($ millions) 87 121 91 95 118 Accounting rate of return 13% 13% 15% 22% 11% Net Present Value ($ millions) 0 11 -1 7 10 Payback Period (Years) 3 5 7 3 5 Internal Rate of Return 9.5% 13.2% 8.0% 11.7% 12.5% Management’s stated goal is to maximise the wealth of the firm’s owners, and to be accepted any investment project must have a minimum investment yield of 10%. Required: Which of the above projects, if any, should be selected by management? Explain the rationale for your choice.
- Simple Investment Allocation Case: This year, 2022 ABM Company selected your team to manage their allotted budget amounting to 10 million pesos for investment diversification portfolio. Your team was assigned to handle the said account. What would you choose? Other investment assets or Alternatives to fixed income and equitiesThe Atlantic Division of Oriole Productions Company reported the following results for 2022: Sales Variable costs Controllable fixed costs Average operating assets Management is considering the following independent alternative courses of action in 2023 in order to maximize the return on investment for the division. 1. 2. 3. (a) $4,032,000 3,213,504 314,000 2,514,000 Reduce controllable fixed costs by 10% with no change in sales or variable costs.. Reduce average operating assets by 10% with no change in controllable margin. Increase sales $500,000 with no change in the contribution margin percentage. Compute the return on investment for 2022. (Round answer to 1 decimal place, e.g. 52.5.) Return on Investment Save for Later % Attempts: 0 of 1 used (b) The parts of this question must be completed in order. This part will be available when you complete the part above. Submit AnswerAll the parts are under one questions and per your policy can be answered in full. 3. Analysis of an expansion project Companies invest in expansion projects with the expectation of increasing the earnings of its business. Consider the case of Garida Co.: Garida Co. is considering an investment that will have the following sales, variable costs, and fixed operating costs: Year 1 Year 2 Year 3 Year 4 Unit sales 4,800 5,100 5,000 5,120 Sales price $22.33 $23.45 $23.85 $24.45 Variable cost per unit $9.45 $10.85 $11.95 $12.00 Fixed operating costs $32,500 $33,450 $34,950 $34,875 This project will require an investment of $20,000 in new equipment. Under the new tax law, the equipment is eligible for 100% bonus deprecation at t = 0, so it will be fully depreciated at the time of purchase. The equipment will have no salvage value at the end of the project’s four-year life. Garida pays a constant tax rate of 25%, and it has a weighted average cost of…
- Knix Products is a d expects to earn a p P3.45million; without operating assets of P3 project - adding knitti investment of P600,0- would increase by P5 net operating assets b Assume that the minim Required: 1. Compute the R 2. Compute the m that the produ computed in Re 3. Compute the RO the divisional mC1 C2 R to 22800 18000 221002. Analysis of an expansion project Companies invest in expansion projects with the expectation of increasing the earnings of its business. Consider the case of Garida Co.: Garida Co. is considering an investment that will have the following sales, variable costs, and fixed operating costs: Year 1 Year 2 Year 3 Year 4 Unit sales 4,200 4,100 4,300 4,400 Sales price $29.82 $30.00 $30.31 $33.19 Variable cost per unit $12.15 $13.45 $14.02 $14.55 Fixed operating costs except depreciation $41,000 $41,670 $41,890 $40,100 Accelerated depreciation rate 33% 45% 15% 7% This project will require an investment of $15,000 in new equipment. The equipment will have no salvage value at the end of the project’s four-year life. Garida pays a constant tax rate of 40%, and it has a weighted average cost of capital (WACC) of 11%. Determine what the project’s net present value (NPV) would be when using accelerated depreciation. Determine what the project’s net…