Wiley 26

1) Quillen Company is performing a post-audit of a project completed one year ago. The initial estimates were that the project would cost $246,248, would have a useful life of 9 years, zero salvage value, and would result in net annual cash flows of $45,200 per year. Now that the investment has been in operation for 1 year, revised figures indicate that it actually cost $251,133, will have a total useful life of 11 years, and will produce net annual cash flows of $37,900 per year. Evaluate the success of the project. Assume a discount rate of 10%.

(If the net present value is negative, use either a negative sign preceding the number eg -45 or parentheses eg (45). Round present value answers to 0 decimal places, e.g. 125. For calculation purposes, use 5 decimal places as displayed in the factor table provided.)

Original estimate net present value $________

Revised estimate net present value $________

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2) Swift Oil Company is considering investing in a new oil well. It is expected that the oil well will increase annual revenues by $140,000 and will increase annual expenses by $82,000 including depreciation. The oil well will cost $429,000 and will have a $10,000 salvage value at the end of its 10-year useful life. Calculate the annual rate of return. (Round answer to 2 decimal places, e.g. 12.47.)

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Wiley 22

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Determine the missing amounts. (Round answers to o decimal places, e.g. 250.) Unit Selling Unit Variable Unit Contribution Price Costs Margin 1. $280 $260 Contribution Margin Ratio (a) % (b) $490 (c) $270 % (d) $ 2. 3. (e) (f) $250 20 % $ $