Question
Playland Products is considering producing toy action figures and sandbox toys. The products require different specialized machines, each costing $1 million. Each machine has
Playland Products is considering producing toy action figures and sandbox toys. The products require different specialized machines, each costing $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 $225,000, would the ARR change? Explain and recalculate if necessary. Does this investment pass Playland'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.) Accounting Average annual operating income from asset 87000 Initial investment = rate of return + $ 1,000,000 = 87 %
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