Business Finance
5 Managerial Accounting Questions Due by March 24, 2015

Question Description

5 Managerial Accounting Questions that are due by March 24, 2015. The questions are on the Word document.


Unit8ManagerialAccounting.docx

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Question 1: In the context of present value analysis, what is the discount rate? How does the discount rate affect the present value calculation? If the present value of a future return is calculated using a discount rate of 8%, what can we expect the present value analysis to reveal if the discount rate is changed to 10%? What if the discount rate is changed to 6%? Question 2: Brass Knuckle Company wants to buy a new machine which will not increase its revenues, but that will reduce its costs by $10,000 per year. The machine will cost $60,000 and will have a useful life of nine years. At the end of the machine’s useful life, it will have no salvage value. Brass Knuckle wants an 11% rate of return. Ignoring the effects of taxes, calculate the net present value of the investment. Should Brass Knuckle make this investment? Question 3: An investment that requires a one-time payment of $12,000 will return $5,000 per year for the next four years. If the required rate of return is 11%, calculate the net present value of the investment (ignore the effect of taxes). Should this investment be made? Question 4: Bill Martin made an investment several years ago, and he now has an option as to how it will take the return on that investment. Option 1 is to receive an immediate cash payment of $100,000. Option 2 is to receive a payment of $10,000 per year for the next 10 years and then to receive a final payment of $100,000 in the eleventh year. Option 3 is to receive a payment of $20,000 per year for the next 10 years. Bill desires a rate of return on this investment of at least 8%. Which option will return the most to Bill? Question 5: The Donut Shoppe is considering buying a new donut machine for a total of $110,110. The Donut Shoppe estimates that this new machine will increase its cash inflow each year, after expenses, by $22,000. This machine will have a useful life of 10 years and will have no salvage value. Ignoring the effects of taxes, what is the machine’s internal rate of return, calculated to the nearest whole percentage? ...
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