Frieden Company's contribution format income statement for last month is shown below: $1,200,000 840,000 Sales (40,000 units) Variable expenses Contribution margin Fixed expenses Operating income 360,000 288,000 72,000 $

A new product will cost $750,000 to design, test prototypes, and set up for production. Net revenue the first year is projected to be $225,000. Marketing is unsure whether future year revenues will (a) increase by $25,000 per year as the product’s advantages become more widely known or (b) decrease by 10% per year due to competition. A third pattern of increasing by $25,000 for one year and then decreasing by 10% per year has been suggested as being more realistic. The firm evaluates projects with a 12% interest rate, and it believes that this product will have a 5-year life. Calculate the present worth and rate of return for each scenario.

Jordan Corporation is considering a new product that will be very popular for a couple of years and then slowly lose its commercial appeal.  Sales are projected to be $90,000 in year one, $100,000 in year two, $60,000 in year three, $40,000 in year four, $20,000 in year five, and $10,000 in the final year six. Expenses are expected to be 40% of sales with net working capital requirements to be 15% of the following time period’s revenue.  Equipment of $126,000 will be required for the launch of the product; this equipment can be depreciated straight-line over six years and will be worthless at the end of the project.  The Tax Rate is 20% and the opportunity cost of capital is 14.5%. What is the Internal Rate of Return (rounded to two places)?   Multiple Choice   32.61%   None of the above   13.39%   18.32%   19.46%

The ABC Corporation is considering opening an office in a new market area that would allow it to increase its annual sales by $2.5 million. The cost of goods sold is estimated to be 40 percent of sales, and corporate overhead would increase by $303,000, not including the cost of either acquiring or leasing office space. The corporation will have to invest $2.5 million in office furniture, office equipment, and other up-front costs associated with opening the new office before considering the costs of owning or leasing the office space.   A small office building could be purchased for sole use by the corporation at a total price of $5.1 million, of which $900,000 of the purchase price would represent land value, and $4.2 million would represent building value. The cost of the building would be depreciated over 39 years. The corporation is in a 21 percent tax bracket. An investor is willing to purchase the same building and lease it to the corporation for $540,000 per year for a term of…