Problem Joe Fox is the manager of the Gear division and plans to submit a proposal...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Problem Joe Fox is the manager of the Gear division and plans to submit a proposal for an expanded production area. Joe has projected various conditions for revenues and expense for the expansion, including different sizes and quality components. Knowing that the effect will likely differ under each, Joe plans to submit a conservative estimate for his proposed capital budgeting project this year to avoid a repeat of an unfavorable post-audit evaluation as occurred two years ago. Joe has provided the following data to be used in the analysis of selecting the proposal to be submitted to the capital budget committee. Required rate of return 6.0% Student Work Area Years of Project Scenario Useful Life Net Initial Investment Operating Cash Flows Year 1 Table of useful lives and cash flows for different capital budgeting scenarios (Dollar amounts in thousands) Operating Operating Cash Flows Year 2 Operating Operating Cash Flows Year 4 a. Calculation of IRRS Cash Flows Year 3 A 6 $ (43,869) $ 9,006 $ 9,564 $ 8,831 $ 9,557 $ B 6 (51,967) 11,372 12,042 11,259 11,517 Cash Flows Year 5 9,143 $ 11,880 Operating Cash Flows Year 6 Project Scenario IRR 8,906 10,758 A B C 4 (46,516) 12,414 12,970 12,586 11,730 C 4 (51,118) 14,982 12,853 13,817 14,031 D E 5 (71,715) 15,237 17,496 17,826 15,962 17,682 E F 4 (49,709) 13,054 12,078 13,866 13,686 F G 4 (55,519) 15,361 13,898 15,514 15,491 G H 6 (46,336) 10,422 10,050 9,228 10,221 10,725 9,079 H I 5 (53,417) 12,843 13,283 12,562 11,670 12,677 J 5 (60,032) 12,845 12,328 10,734 10,113 10,960 J K L M N 6545 (51,321) 10,630 8,576 9,787 8,273 9,265 10,909 K (67,073) 13,627 12,263 13,931 13,080 12,984 L (43,994) 9,537 8,490 8,690 9,395 M (39,793) 9,526 9,079 9,779 10,746 8,277 N Instructions: There are three parts to this problem. Use Excel to perform the following: a. Use Excel's IRR function to calculate IRR for each project scenario. b. Create a column chart that illustrates the IRR for each project. Include a descriptive chart title and axes labels in the chart. c. Examine the chart. Which project scenarios are acceptable? Which project scenario would you recommend that Joe submit to the capital budget committee? Justify your response. b. Chart for part b c. Response to part c C Problem Joe Fox is the manager of the Gear division and plans to submit a proposal for an expanded production area. Joe has projected various conditions for revenues and expense for the expansion, including different sizes and quality components. Knowing that the effect will likely differ under each, Joe plans to submit a conservative estimate for his proposed capital budgeting project this year to avoid a repeat of an unfavorable post-audit evaluation as occurred two years ago. Joe has provided the following data to be used in the analysis of selecting the proposal to be submitted to the capital budget committee. Required rate of return 6.0% Student Work Area Years of Project Scenario Useful Life Net Initial Investment Operating Cash Flows Year 1 Table of useful lives and cash flows for different capital budgeting scenarios (Dollar amounts in thousands) Operating Operating Cash Flows Year 2 Operating Operating Cash Flows Year 4 a. Calculation of IRRS Cash Flows Year 3 A 6 $ (43,869) $ 9,006 $ 9,564 $ 8,831 $ 9,557 $ B 6 (51,967) 11,372 12,042 11,259 11,517 Cash Flows Year 5 9,143 $ 11,880 Operating Cash Flows Year 6 Project Scenario IRR 8,906 10,758 A B C 4 (46,516) 12,414 12,970 12,586 11,730 C 4 (51,118) 14,982 12,853 13,817 14,031 D E 5 (71,715) 15,237 17,496 17,826 15,962 17,682 E F 4 (49,709) 13,054 12,078 13,866 13,686 F G 4 (55,519) 15,361 13,898 15,514 15,491 G H 6 (46,336) 10,422 10,050 9,228 10,221 10,725 9,079 H I 5 (53,417) 12,843 13,283 12,562 11,670 12,677 J 5 (60,032) 12,845 12,328 10,734 10,113 10,960 J K L M N 6545 (51,321) 10,630 8,576 9,787 8,273 9,265 10,909 K (67,073) 13,627 12,263 13,931 13,080 12,984 L (43,994) 9,537 8,490 8,690 9,395 M (39,793) 9,526 9,079 9,779 10,746 8,277 N Instructions: There are three parts to this problem. Use Excel to perform the following: a. Use Excel's IRR function to calculate IRR for each project scenario. b. Create a column chart that illustrates the IRR for each project. Include a descriptive chart title and axes labels in the chart. c. Examine the chart. Which project scenarios are acceptable? Which project scenario would you recommend that Joe submit to the capital budget committee? Justify your response. b. Chart for part b c. Response to part c C
Expert Answer:
Answer rating: 100% (QA)
To complete the task we need to follow these steps 1 Use Excels IRR function to calculate the IRR for each project scenario 2 Create a column chart to ... View the full answer
Posted Date:
Students also viewed these accounting questions
-
What is the aim of PRINCE2? AppendixLO1
-
1. Is this form of analysis appropriate? 2. Interpret the computer output and critique the analysis. 3. Explore the GLM (General Linear Model) procedure in SAS or SPSS by testing a model using...
-
Problem 1 Fareh is not married and supports her 12 year old child who lives with her. Fareh works as an employee with gross salaries and wages of $122,000. Fareb's only other income was interest of...
-
Afrequency distribution is shown below. Complete parts (a) and (b). Question list 16 . , , The number of teleVISIons per household In a small town Televisions 0 1 2 3 l: 0 Question 1 1 Households 29...
-
Q17. An insurance company charges $500 for an insurance policy against fire and theft in the home. If a home is destroyed by fire, then the insurance company will pay the homeowner $250,000. What is...
-
If y = x ( 9 x + 5 ) , compute y ' .
-
1. Print out your name and section. 2. Create a java code to find speed of a car. a. Import the required codes to allow the user to enter data. b. The formula for speed is speed=distance/time. c. Ask...
-
Complete the square for 9 x 2 - 9 0 x + y 2 + 8 1 = 0
-
Factor completely. x10 2x5 +1
-
Which of the following is one result of a nation's imports exceeding its exports? a) GDP will be less than the sum of consumption, investment, and government purchases. O GDP will be greater than the...
![Mobile App Logo](https://dsd5zvtm8ll6.cloudfront.net/includes/images/mobile/finalLogo.png)
Study smarter with the SolutionInn App