Chapter 14 Assignment 6 18 Casey Nelson is a divisional manager for Pigeon Company His annual pay raises are largely determined by his division's return on investment (ROI), which has been above 23% each of the last three years. Casey is considering a capital budgeting project that would require a $4,700,000 investment in equipment with a useful life of five years and no salvage value. Pigeon Company's discount rate is 19%. The project would provide net operating income each year for five years as follows: 565 points $4,400,000 2.000.000 2,400,000 eBook Sales Variable expenses Contribution margin Fixed expenses Advertising, salaries, and other fixed out-of-pocket coats Depreciation Total fixed expenses Mat operating income $800,000 940,000 Print 1.740.000 3 660,000 References Click here to view Exhibit 148.1 and Exhibit 140-2. to determine the appropriate discount factor(s) using tables. Required: 1. What is the project's net present value? 2. What is the project's internal rate of return to the nearest whole percent? 3. What is the project's simple rate of return? 4-a. Would the company want Casey to pursue this investment opportunity? 4-5 Would Casey be inclined to pursue this investment opportunity? Complete this question by entering your answers in the tabs below. Reg 1 Reg 2 Reg 3 Reg 4 Reg 48 What is the project's simple rate of return? (Round your answer to 1 decimal place) Simple rate of return Chapter 14 Assignment Saved 18 Casey Nelson is a divisional manager for Pigeon Company. His annual pay raises are largely determined by his division's return on investment (ROI), which has been above 23% each of the last three years. Casey is considering a capital budgeting project that would require a $4,700,000 investment in equipment with a useful life of five years and no salvage value. Pigeon Company's discount rate is 19%. The project would provide net operating income each year for five years as follows: 5.65 orts $4,400,000 2.000.000 2,400,000 book Sales Variable expenses Contribution margin Fixed expenses Advertising, salaries, and other fixed out-of-pocket costs Depreciation Total fixed expenses Wet operating income 5 800,000 940,000 Print 1.740.000 660,000 References Click here to view Exhibit 14B-1 and Exhibit 1482. to determine the appropriate discount factors) using tables Required: 1 What is the project's net present value? 2. What is the project's internal rate of return to the nearest whole percent? 3. What is the project's simple rate of return? 4-a. Would the company want Casey to pursue this investment opportunity? 4-6. Would Casey be inclined to pursue this investment opportunity Complete this question by entering your answers in the tabs below. Reg 1 Reg 2 Reg 3 Reg 4 Reg 40 What is the project's internal rate of return? (Round your answer to the nearest whole percentage, le 0.123 should be considered as 12%) Intemal rate of return Casey Nelson is a divisional manager for Pigeon Company. His annual pay raises are largely determined by his division's return on investment (ROI), which has been above 23% each of the last three years, Casey is considering a capital budgeting project that would require a $4,700,000 investment in equipment with a useful life of five years and no salvage value. Pigeon Company's discount rate is 19%. The project would provide net operating income each year for five years as follows: $ 4,400,000 2.000.000 2,400,000 Sales Variable expenses Contribution margin Pixed expenses Advertising, salaries, and other fixed out-of-pocket costs Depreciation Total fixed expenses Net operating income $ 800,000 940,000 1.740,000 $ 660,000 Click here to view Exhibit 148.1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using tables. Required: 1. What is the project's net present value? 2. What is the project's internal rate of return to the nearest whole percent? 3. What is the project's simple rate of return? 4-a. Would the company want Casey to pursue this investment opportunity? 4-6. Would Casey be inclined to pursue this investment opportunity? Complete this question by entering your answers in the tabs below. Reg 1 Reg 2 Reg 3 Reg 4A Req 4B What is the project's net present value? (Round your final answer to the nearest whole dollar amount.) Nel present value Reg 2 > Wendell's Donut Shoppe is investigating the purchase of a new $42,900 donut making machine. The new machine would permit the company to reduce the amount of part-time help needed, at a cost savings of $5,800 per year. In addition, the new machine would allow the company to produce one new style of donut, resulting in the sale of 2,000 dozen more donuts each year. The company realizes a contribution margin of $2.00 per dozen donuts sold. The new machine would have a six-year useful life. Click here to view Exhibit 148-1 and Exhibit 148-2. to determine the appropriate discount factors) using tables. Required: 1. What would be the total annual cash inflows associated with the new machine for capital budgeting purposes? 2. What discount factor should be used to compute the new machine's Internal rate of return? (Round your answers to 3 decimal places.) 3. What is the new machine's internal rate of return? (Round your final answer to the nearest whole percentage.) 4. In addition to the data given previously, assume that the machine will have a $16,575 salvage value at the end of six years. Under these conditions, what is the internal rate of return? (Hint: You may find it helpful to use the net present value approach find the discount rote that will cause the net present value to be closest to zero) (Round your final answer to the nearest whole percentage.) 1. Annual cash inflows 2. Discount factor 3. Internal rate of retum 4. inter rate of return % % Saved signment The management of Kunkel Company is considering the purchase of a $36,000 machine that would reduce operating costs by $8,500 per year. At the end of the machine's five-year useful life, it will have zero salvage value. The company's required rate of return is 13% Click here to view Exhibk 148-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using table. Required: 1. Determine the net present value of the investment in the machine. 2. What is the difference between the total, undiscounted cash inflows and cash outflows over the entire life of the machine? Complete this question by entering your answers in the tabs below. Required 1 Required 2 What is the difference between the total, undiscounted cash inflows and cash outflows over the entire life of the machine? (Any cash outflows should be indicated by a minus sign.) Total diference in undiscounted cash inflows and outflows ment Required information [The following information applies to the questions displayed below.) Cardinal Company is considering a five-year project that would require a $2,750,000 investment in equipment with a useful life of five years and no salvage value. The company's discount rate is 18%. The project would provide net operating income in each of five years as follows: $2,849,000 1,122,000 1, 727,000 Sales Variable expenses Contribution margin Fixed expenses 1 Advertising, salaries, and other fixed out-of-pocket costs Depreciation Total fixed expenses Net operating income $ 752,000 550,000 1,302,000 $425,000 Click here to view Exhibit 148.1 and Exhibit 148-2. to determine the appropriate discount factor(s) using table. 15. Assume a postaudit showed that all estimates (including total sales) were exactly correct except for the variable expense ratio, which actually turned out to be 45%. What was the project's actual simple rate of return? (Round your answer to 2 decimal places.) Simple rate of return % Saved gnment Required information {The following information applies to the questions displayed below.) Cardinal Company is considering a five-year project that would require a $2,750,000 investment in equipment with a useful life of five years and no salvage value. The company's discount rate is 18%. The project would provide net operating income in each of five years as follows: $2,849,000 1.122,000 1, 727,000 Sales Variable expenses Contribution margin Fixed expenses Advertising, salaries, and other Eixed out-of-pocket costs Depreciation Total fixed expenses Net operating income $ 752,000 550,000 1,302,000 425,000 Click here to view Exhibit 148-1 and Exhibit 148-2. to determine the appropriate discount factor(s) using table. 14. Assume a postaudit showed that all estimates (including total sales) were exactly rrect except for the variable expense ratio, which actually turned out to be 45% What was the project's actual payback period? (Round your answer to 2 decimal places.) Payback period years D Required information [The following information applies to the questions displayed below.) Cardinal Company is considering a five-year project that would require a $2,750,000 investment in equipment with a useful life of five years and no salvage value. The company's discount rate is 18%. The project would provide net operating income in each of five years as follows: $2,849,000 1,122.000 1,727,000 Sales Variable expenses Contribution margin Fixed expenses Advertising, salaries, and other fixed out-of-pocket costs Depreciation Total fixed expenses Net operating income $752,000 550.000 1.302,900 425,000 Click here to view Exhibit 148-1 and Exhibit 14B-2. to determine the appropriate discount factor(s) using table. 13. Assume a postaudit showed that all estimates (including total sales) were exactly correct except for the variable expense ratio, which actually turned out to be 45%. What was the project's actual net present value? (Negative amount should be indicated by a minus sign. Round intermediate calculations and final answer to the nearest whole dollar amount.) Nel present value O Required information [The following information applies to the questions displayed below) Cardinal Company is considering a five-year project that would require a $2,750,000 investment in equipment with a useful life of five years and no salvage value. The company's discount rate is 18%. The project would provide net operating income in each of five years as follows: $2,849,000 1, 122,000 1, 727,000 Sales Variable expenses Contribution margin Fixed expenses Advertising, salaries, and other Fixed out-of-pocket costs Depreciation Total tixed expenses Net operating income $ 752,000 550,000 1,302,000 425,000 Click here to view Exhibit 148-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using table. 5. What is the profitability index for this project? (Round your answer to 2 decimal places.) Profitability index