Managerial Accounting
3rd Edition
ISBN: 9780077826482
Author: Stacey M Whitecotton Associate Professor, Robert Libby, Fred Phillips Associate Professor
Publisher: McGraw-Hill Education
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Chapter 12, Problem 10ME
Interpreting
Quantum Dot, Inc., is a nanotechnology company that manufactures “quantum dots,” which are tiny pieces of silicon consisting of loo or more molecules. Quantum dots can be used to illuminate very small objects, enabling scientists to see the blood vessels beneath a mouse’s skin ripple with each heartbeat, at the rate of 100 times per second.
Evaluate this research intensive company’s cash flows, assuming the following was reported in its statement of cash flows.
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Your boss, the chief financial officer (CFO) for Dream Analytics Inc., has just handed you the estimated cash flows for two proposed projects. Project A involves adding a new item to the firm’s Digital Intelligence software line. It would take some time to build up the market for this product, so the cash inflows would increase over time. Project B involves an add-on to an existing Global Integration self-guided software line, and its cash flows would decrease over time. Both projects have 4-year lives because Dream Analytics is planning to introduce an entirely new Artificial Intelligence software product at that time. The budget is $25,000 for the initial investment. Here are the estimated net cash flows (in thousands of dollars): Expected Net Cash Flows Year Project A Project B 0 $(25,000) $(25,000) 1 12500 9000 2 9900 23000 3 21000 11000 4 14000 1500 The CFO also made subjective risk assessments of each project, and he concluded that the projects both have risk characteristics that…
The Tech company. Inc. is currently making windfall profits from the sales of financial programming software, so the company is looking for new investment opportunities to invest the profits and maintain its growth. The firm decided to undertake one of these two projects.
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Project B: launch into the manufacture of computer equipment (external hard drives)
The cash flow projections for the two projects are as follows:
0
1
2
3
4
I0
FM1
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FM3
FM4
Project A
100,000
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130,000
160,000
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The Tech company. Inc. is currently making windfall profits from the sales of financial programming software, so the company is looking for new investment opportunities to invest the profits and maintain its growth. The firm decided to undertake one of these two projects.
Project A: invest in the development and improvement of the already existing software (create a new version)
Project B: launch into the manufacture of computer equipment (external hard drives)
The cash flow projections for the two projects are as follows:
0
1
2
3
4
I0
FM1
FM2
FM3
FM4
Project A
100,000
60,000
40,000
30,000
20,000
Project B
350,000
60,000
100,000
130,000
160,000
The rate of return required by senior management is 10%
1. Calculate simple payback period and discounted payback period, and give your recommendation, if the maximum period acceptable to senior management is 3 years?
2. Calculate the NPV (net present value) of each project and give…
Chapter 12 Solutions
Managerial Accounting
Ch. 12 - Compare the purposes of the income statement, the...Ch. 12 - What information does the statement of cash flows...Ch. 12 - Prob. 3QCh. 12 - What are the major categories of business...Ch. 12 - Prob. 5QCh. 12 - Prob. 6QCh. 12 - Prob. 7QCh. 12 - Prob. 8QCh. 12 - Prob. 9QCh. 12 - Prob. 10Q
Ch. 12 - As a junior analyst, you are evaluating the...Ch. 12 - Prob. 12QCh. 12 - Prob. 13QCh. 12 - Prob. 14QCh. 12 - Prob. 15QCh. 12 - Prob. 1MCCh. 12 - Prob. 2MCCh. 12 - Prob. 3MCCh. 12 - Prob. 4MCCh. 12 - Prob. 5MCCh. 12 - Prob. 6MCCh. 12 - Prob. 7MCCh. 12 - Prob. 8MCCh. 12 - Prob. 9MCCh. 12 - Prob. 10MCCh. 12 - Prob. 1MECh. 12 - Prob. 2MECh. 12 - Prob. 3MECh. 12 - Prob. 4MECh. 12 - Prob. 5MECh. 12 - Prob. 6MECh. 12 - Prob. 7MECh. 12 - Prob. 8MECh. 12 - Prob. 9MECh. 12 - Interpreting Cash Flows from Operating, Investing,...Ch. 12 - Prob. 11MECh. 12 - Prob. 12MECh. 12 - Prob. 13MECh. 12 - Prob. 1ECh. 12 - Prob. 2ECh. 12 - Prob. 3ECh. 12 - Prob. 4ECh. 12 - Prob. 5ECh. 12 - Prob. 6ECh. 12 - Prob. 7ECh. 12 - Prob. 8ECh. 12 - Reporting and Interpreting Cash Flows from...Ch. 12 - Prob. 10ECh. 12 - Prob. 11ECh. 12 - Prob. 12ECh. 12 - Prob. 13ECh. 12 - Prob. 14ECh. 12 - Prob. 15ECh. 12 - Prob. 16ECh. 12 - Prob. 17ECh. 12 - Prob. 18ECh. 12 - Prob. 19ECh. 12 - Prob. 20ECh. 12 - Prob. 21ECh. 12 - Prob. 22ECh. 12 - (Supplement 12B) Preparing a Statement of Cash...Ch. 12 - Prob. 1GAPCh. 12 - Prob. 2GAPCh. 12 - Prob. 3.1GAPCh. 12 - Prob. 3.2GAPCh. 12 - Prob. 4.1GAPCh. 12 - Prob. 4.2GAPCh. 12 - Prob. 5GAPCh. 12 - Preparing and Interpreting a Statement of Cash...Ch. 12 - Prob. 7.1GAPCh. 12 - Prob. 7.2GAPCh. 12 - Prob. 1GBPCh. 12 - Prob. 2GBPCh. 12 - Prob. 3.1GBPCh. 12 - Prob. 3.2GBPCh. 12 - Prob. 4.1GBPCh. 12 - Prob. 4.2GBPCh. 12 - Prob. 5GBPCh. 12 - Prob. 6GBP
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