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Less selling and admin. expenses 28,000
Net operating income $12,000
2. Question : (TCO I) (Ignore income taxes in this problem.) Bill Anders
retires in 8 years.
He has $650,000 to invest and is considering a franchise for a fast-food
outlet. He would have to purchase equipment costing $500,000 to equip
the
outlet and invest an additional $150,000 for inventories and other
working
capital needs. Other outlets in the fast-food chain have an annual net
cash
inflow of about $160,000. Mr. Anders would close the outlet in 8 years.
He
estimates that the equipment could be sold at that time for about 10% of
its
original cost. Mr. Anders' required rate of return is 16%.
Required:
Part A: What is the investment's net present value when the discount rate
is
16%?
Part B: Refer to your calculations. Is this an acceptable investment?
Why or
why not?
3. Question : (TCO A) The following data (in thousands of dollars) have
been taken from the accounting records of the Maroon Corporation for
the just-completed
year.
Sales 1,300
Raw materials inventory, beginning 25
Raw materials inventory, ending 30
Purchases of raw materials 250
Direct labor 350
Manufacturing overhead 500
Administrative expenses 300
Selling expenses 250