1 ACC 241 Uses of Accounting Information II (1) Haoming Lyu : Homework: HW #7 - Chapter 12 Save Score: 0.75 of 1 pt 3 of 9 (3 complete) HW Score: 27.5%, 2.75 of 10 pts Xx S12-4 (similar to) s Question Help 0 Play Life Products is considering producing toy action figures and sandbox toys. The products require different specialized machines, each costing $1.1 million. Each machine has a five-year life and zero residual value. The two products have different patterns of predicted net cash inflows. :: (Click the icon to view the data.) Calculate the toy action figure project's ARR. If the toy action figure project had a residual value of $125,000, would the ARR change? Explain and recalculate if necessary. Does this investment pass Play Life's ARR screening rule? First, enter the formula, then compute the ARR of the toy action figure project. (Enter amounts in dollars, not millions. Enter your answer as a percent rounded to two decimal places.) 1 Initial investment Average annual operating income from asset 97,750 Accounting rate of return 8.89 $ 1,100,000 If the toy action figure project had a residual value of $125,000, would the ARR change? If the toy action figure project had a $125,000 residual value, the ARR would change The residual value would cause the yearly depreciation expense to decrease , which will cause the average annual operating income from the investment to increase Compute the ARR of the toy action figure project with a residual value of $125,000. (Enter your answer as a percent rounded to two decimal places.) The ARR of the toy action figure project with a residual value of $125,000 is %. Enter any number in the edit fields and then click Check Answer. i Data Table Annual Net Cash Inflows Year Toy action Sandbox toy figure project project 1. $ 317,750 $ 500,000 2. 317,750 340,000 3. 317,750 330,000 4. 317,750 280,000 . 317,750 30,000 $ 1,588,750 $ 1,480,000 Total Play Life will consider making capital investments only if the payback period of the project is less than 3.5 years and the ARR exceeds 8% Print Done