5. A company wishes to go ahead with one of two mutually exclusive projects, but the profit outcome from each project will depend on the strength of sales demand, as follows. Strong demand Profit Project 1 Project 2 Probability of demand 0.2 80,000 60,000 Moderate demand Profit $ 50,000 25,000 0.4 Weak demand Profit/(Loss) (5,000) 10,000 0.4

5. A company wishes to go ahead with one of two mutually exclusive projects, but the profit outcome from each project will depend on the strength of sales demand, as follows. Strong demand Profit Project 1 Project 2 Probability of demand 0.2 80,000 60,000 Moderate demand Profit $ 50,000 25,000 0.4 Weak demand Profit/(Loss) (5,000) 10,000 0.4

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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Q3. Contribution Margin of Walls Corporation, Consumer division is Rs. 1900,000 and the fixed expenses is Rs. 2,200,000 per year. Company is considering to eliminate this consumer division. If the Consumer Division is eliminated, $1,700,000 of the above fixed expenses could be avoided. What will be the effect on Wall's profit next year if Consumer Division is eliminated?
The profit function of a company is P(x) = x² – 400x + 40000, then the break-even point is Select one: O a. 400 O b. 40000 O c 200 O d. 0
> Question 3: Sohar Company's financial information is given in the table below. Sales (OMR) Fixed Costs 90000 120000 Year Variable Costs 405000 2019 2020 225000 450000 240000 Calculate: c) Sales required to earn a profit of OMR 40000. d) Margin of safety at a profit of OMR 50000 e) Profit when sales are OMR. 200000. 面
Question 3: Oman Company's financial information is given in the table below. Year Sales (OMR) Fixed Costs 445000 Variable Costs : 2020 105000 245000 2021 500000 150000 280000 You are required to calculate the following values for each year. The years are independent of each other. a) P/V ratio, b) В.Е.P. c) Sales required to earn a profit of OMR 45000. d) Margin of safety at a profit of OMR 50000 e) Profit when sales are OMR. 300000.
14. Given the data for two alternatives, choose the better alternative using the B/C ratio analysis. MARR = 8% Alternative X Y First cost $100,000 50,000 Operating costs/year Benefits /year Dis-benefits/year Life in years $140,000 60,000 120,000 25,000 100,000 30,000 5 10
Actual operating results for the shop are presented below: S 250,000.00 VC 100,000.00 CM 150,000.00 FX 120,000.00 NI 30,000.00 Required: Compute the Degree of Operating Leverage Factor Using the said concept, how many percent would income increase if the sales increase by 10%?
All parts are under one question, per your policy all parts can be answered. 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 Yeatman Co.: Yeatman 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 3,000 3,250 3,300 3,400 Sales price $17.25 $17.33 $17.45 $18.24 Variable cost per unit $8.88 $8.92 $9.03 $9.06 Fixed operating costs $12,500 $13,000 $13,220 $13,250 This project will require an investment of $15,000 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. Yeatman pays a constant tax rate of 25%, and it has a weighted average cost of…
4. Jim Bildery's factory is considering three approaches for meeting an expected increase in demand. The three approaches are increasing capacity, using overtime, and buying more equipment. Demand will either increase slightly (S), moderately (M), or greatly (G). The profits for each approach under each possible scenario are as follows Demand Scenario Approach Increase Capacity Use Overtime Buy Equipment Slight Increase $700,000 $480,000 $630,000 Moderate Increase $700,000 $630,000 $800,000 Great Increase $700,000 $1,200,000 $800,000 The probabilities associate with the states of nature are 0.3 for S, 0.45 for M, an 0.25 for G. a. What is the alternative that provides the factory the greatest expected value and what is the EV of the decision? b. Calculate the EVPI.
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 Lumbering Ox Truckmakers: Lumbering Ox Truckmakers 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 (units) 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 $10,000 in new equipment. The equipment will have no salvage value at the end of the project’s four-year life. Lumbering Ox Truckmakers pays a constant tax rate of 40%, and it has a required rate of return of 11%. When using accelerated depreciation, the project’s net present value (NPV) is .…
Companies invest in expansion projects with the expectation of increasing the earnings of its business. Consider the case of McFann Co.: McFann 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 3,000 3,250 3,300 3,400 Sales price $17.25 $17.33 $17.45 $18.24 Variable cost per unit $8.88 $8.92 $9.03 $9.06 Fixed operating costs $12,500 $13,000 $13,220 $13,250 This project will require an investment of $25,000 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. McFann pays a constant tax rate of 25%, and it has a weighted average cost of capital (WACC) of 11%. Determine what the project’s net present value (NPV) would be under the new tax law. Determine what…
17-Assume that in one of the written test of your interview, the following question has been asked. If the breakeven point OMR 40,000, Profit OMR 2000 and fixed cost OMR 8000.What will be the amount of variable cost? Being the interviewee how will you answer this question ? a. OMR 32000 b. OMR42000 c. OMR 50000 d. OMR 40000
Question 3: Sohar Company's financial information is given in the table below. Sales (OMR) Fixed Costs 405000 Year Variable Costs 2019 90000 225000 2020 450000 120000 240000 Calculate: a) PV ratio, b) B.E.P in units and Sales c) Sales required to earn a profit of OMR 40000.Each year is separate, you should calculate the required values for both years. d) Margin of safety at a profit of OMR 50000 e) Profit when sales are OMR. 200000.