Assignment: Capital Budgeting Decisions Your company is considering undertaking a project to expand an existing product line. The required rate of return on the project is 8% and the maximum allowable payback period is 3 years. Time 0 1 2 3 4 5 6 Cash Flow S(10,000) $2,400 $4,800 $3,200 $3,200 $2,800 $2,400 Questions Evaluate the project using each of the following methods. For each method, should the project be accepted or rejected? Justify your answer based on the method used to evaluate the project's cash flows. 1. Payback period 2. Internal Rate of Return (IRR) 3. Simple Rate of Return 4. Net Present Value Assignment: Capital Budgeting Decisions by Linda Williams in Accounting for Managers by Lumen Learning is licensed under CC-BY 4.0 Profit Sales CM Review Problems: Contribution margin and ratio Problem 11 (10 points) Sales per unit S250 Variable Cost per unit $150 Units - 350 1. Calculate Contribution Margin Per Unit (2 points) 2. Calculate Contribution Margin (CM) Ratio Per Unit (3 points) 3. Calculate Total Contribution Margin (CM) Dollars (5 points) Problem 2: (5 points) Sales = $5,000,000 CM Ratio 0.40 Fixed cost $1,600,000 1. Calculate Profit. Problem 3: (5 points) A company has budgeted sales of $200,000, a profit of $60,000 and fixed expenses of $40,000. 1. Calculate the contribution margin ratio. Review Problem: Break-even point Problem 4: (15 points) Voltar Company manufactures and sells a telephone answering machine. The company's contribution format income statement for the most recent year is given below: Total Per unit Pct. of sales (Ratios) Sales $1,200,000 $60 100% Less variable 900,000 45 expenses 300,000 Contribution margin Less fixed expenses 240,000 Net operating $60,000 income 1. What is the Contribution Margin (CM) Ratio (or percent of sales)? (5 points) 2. Calculate break-even point both in total units and total sales dollars. (10 points) Problem 5: (15 points) Management is anxious to improve the company's profit performance. Assume that next year management wants the company to earn a minimum profit of $90,000. 1. How many units will have to be sold to meet the target profit figure