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Chapter26homework

# Chapter26homework - Laura Stroup Acct II Professor Woodward...

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Chapter 26 Homework 5/13/2008 E26-8 The Other 5 Div. This would Sales \$1,664,200 COGS (978520+20,407)= \$998,990 (110,670<1 Gross 665,210 Op. Exp. (527,940+26,600)= \$554,540 Net Inc. \$110,670 E26-14 Project Internal Rate of Return 22A (240,000/53,300)= 4.503=9% 23A (270,000/51,000)= 5.294=12% 24A (288,000/56,000)= 5.143= 11% B) 23A, 24A E26-15 A) Project A Discout Factor for 5 years 3.79 Present value of net ann. Cash flows (50,000X3.79079)= 189539.50 Captial Investment 200,000 Negative Net Present Value (\$10,460.50) Project B Discout Factor for 7 years 4.87 Present value of net ann. Cash flows (65,000X4.86842)=316,447.30 Captial Investment 300,000 Positive Net Present Value \$16,447.30 B) Project B because it is profitable

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Unformatted text preview: Laura Stroup Acct II Professor Woodward actually not be a smart move because although Ketchum Division is not profitable, it would cause the total net inc 157,740) 140,870-110,670=\$30,200 loss Key to income analysis: any time a division has a positive contribution margin, y Payment X Factor = Present Value 13300+(240,000/6)=cash:\$53,300 53,000 X ? = 240,000 ? = 240,000/53,000 ? = 4,503 ? = 9% Payback Method: Project A Project B (200,000/50,000)= 4 (300,000/65,000)=4.6 B) Project A because it has a shorter payback method come to decrease. you're better off keeping it. Also, whenever you drop a division, your fixed costs don't go away....
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Chapter26homework - Laura Stroup Acct II Professor Woodward...

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