2. The Gustavo Industries in São Paulo, Brazil, reported the following results for 2020(currency in Brazilian real, R$):«SalesR$ 400,000,000-320,000,000-40,800,000-280,000,000-Variable costsControllable fixed costsAverage operating assetsGustavo's Management is considering the following independent courses of actionin 2021 in order to maximize the return on investment for this division:Option1: Reduce average operating assets by R$ 80,000,000 with no change incontrollable margin.Option2: Increase sales R$ 80,000,000 with no change in the contributionmargin percentage.A. Compute the controllable margin and the return on investment for 2020. (25%)-B. Compute the controllable margin and the expected return on investment foreach proposed option. (25%)-

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Answered: A. Compute the controllable margin and…

A. Compute the controllable margin and the return on investment for 2020. (25%)- B. Compute the controllable margin and the expected return on investment for

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Gemilang Berhad is considering which of two mutually exclusive projects it should undertake as its investment in the month of February 2019. The finance director thinks that the project with the higher Net Present Value (NPV) should be chosen whereas the managing director thinks that the one with the shorter payback period should be taken. As a management accountant, you are given with the followings projected profit: Project Initial cost AA (RM) (70,000) 15,000 ZZ (RM) (60,000) Year 1 20,000 Year 2 18,000 25,000 Year 3 20,000 32,000 18,000 Year 4 Year 5 Notes: All cash flows take place at the end of the year apart from the original investment in the project which takes place at the beginning of the project. 1. Project AA machinery is to be disposed of at the end of year 5 with a scrap value of RM10,000. 2. 3. Project ZZ machinery is to be disposed at the end of year 3 with a nil scrap value. 4. Gemilang Berhad's policy is to depreciate its assets on a straight line basis. 5. The…
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All the parts are under one questions and per your policy can be answered in full. 3. Analysis of an expansion project Companies invest in expansion projects with the expectation of increasing the earnings of its business. Consider the case of Garida Co.: Garida Co. is considering an investment that will have the following sales, variable costs, and fixed operating costs: Year 1 Year 2 Year 3 Year 4 Unit sales 4,800 5,100 5,000 5,120 Sales price $22.33 $23.45 $23.85 $24.45 Variable cost per unit $9.45 $10.85 $11.95 $12.00 Fixed operating costs $32,500 $33,450 $34,950 $34,875 This project will require an investment of $20,000 in new equipment. Under the new tax law, the equipment is eligible for 100% bonus deprecation at t = 0, so it will be fully depreciated at the time of purchase. The equipment will have no salvage value at the end of the project’s four-year life. Garida pays a constant tax rate of 25%, and it has a weighted average cost of…
Knix Products is a d expects to earn a p P3.45million; without operating assets of P3 project - adding knitti investment of P600,0- would increase by P5 net operating assets b Assume that the minim Required: 1. Compute the R 2. Compute the m that the produ computed in Re 3. Compute the RO the divisional m
C1 C2 R to 22800 18000 22100
2. Analysis of an expansion project Companies invest in expansion projects with the expectation of increasing the earnings of its business. Consider the case of Garida Co.: Garida Co. is considering an investment that will have the following sales, variable costs, and fixed operating costs: Year 1 Year 2 Year 3 Year 4 Unit sales 4,200 4,100 4,300 4,400 Sales price $29.82 $30.00 $30.31 $33.19 Variable cost per unit $12.15 $13.45 $14.02 $14.55 Fixed operating costs except depreciation $41,000 $41,670 $41,890 $40,100 Accelerated depreciation rate 33% 45% 15% 7% This project will require an investment of $15,000 in new equipment. The equipment will have no salvage value at the end of the project’s four-year life. Garida pays a constant tax rate of 40%, and it has a weighted average cost of capital (WACC) of 11%. Determine what the project’s net present value (NPV) would be when using accelerated depreciation. Determine what the project’s net…