Purchase Solution

NPV

Not what you're looking for?

Ask Custom Question

Martinez Company has money available for investment and is considering two projects each costing $70,000. Each project has a useful life of 3 years and no salvage value. The investment cash flows follow:
Project A Project B
Year 1 $ 8,000 $28,000
Year 2 24,000 28,000
Year 3 52,000 28,000

Instructions
If 8% is an acceptable earnings rate, which project should be selected? Justify your response.

4. Guong Co. has three product lines in its retail stores: books, videos, and music. Results of the fourth quarter are presented below: (25 points)
Books Music Videos Total
Units sold 1,000 2,000 2,000 5,000
Revenue $22,000 $40,000 $23,000 $85,000
Variable departmental costs 17,000 22,000 12,000 51,000
Direct fixed costs 1,000 3,000 2,000 6,000
Allocated fixed costs 7,000 7,000 7,000 21,000
Net income (loss) $ (3,000) $ 8,000 $ 2,000 $ 7,000

The allocated fixed costs are unavoidable. Demand of individual products are not affected by changes in other product lines.

Instructions
What will happen to profits if Guong Co. discontinues the Books product line?

Purchase this Solution
Solution Summary

The solution goes into a great amount of detail in order to answer the question. The solution is very well written and easy to understand. The explanation can be very easily understood by anyone with a basic understanding of the concepts. Overall, an excellent response to the question being asked.

Purchase this Solution
Free BrainMass Quizzes
Academic Reading and Writing: Critical Thinking

Importance of Critical Thinking

Writing Business Plans

This quiz will test your understanding of how to write good business plans, the usual components of a good plan, purposes, terms, and writing style tips.

Production and cost theory

Understanding production and cost phenomena will permit firms to make wise decisions concerning output volume.

Employee Orientation

Test your knowledge of employee orientation with this fun and informative quiz. This quiz is meant for beginner and advanced students as well as professionals already working in the HR field.

Motivation

This tests some key elements of major motivation theories.

View More Free Quizzes
Related BrainMass Solutions

  • NPV, IRR, and Sensitivity Analysis

    cash flow Year Cash flow ;+NPV ;-NPV ;+NPV ;-NPV ;+NPV ;-NPV 0 -$42,000 2% 3% 1.00 1.00 -$42,000 -$42,000 1..10 $4,700 2% 3% 8.98 8.53 $42,218 $40,092 NPV $218 -$1,908 IRR 2.10% 10% Decrease Discount

  • Expected NPV and standard deviation of NPV with real example

    What are the project's expected NPV and standard deviation of NPV? b. Should the base case analysis use the most likely NPV or expected NPV? Explain your answer. a.

  • NPV

    126133 NPV You have estimated 3 possible NPV outcomes for an investment under analysis, the expected NPV, the best case NPV and the worst case NPV. You have also gotten estimates from management on the probability of each of these three cases.

  • Coefficeint of variation of NPV

    (Expected NPV and standard deviation of NPV in thousands). The expected NPV, standard deviation of NPV, and coefficeint of variation of NPV is calculated when a probability distribution of NPV is given.

  • Calculating NPV at Various Discount Rates

    What is the NPV at a discount rate of 11 percent? What is the NPV at a discount rate of 21 percent? What is the NPV at a discount rate of 29 percent?

  • NPV, IRR and Profitability Index

    NPV=0.

  • NET PRESENT VALUE and internal rate of return FOR CAPITAL

    You can get the NPV for 0%. 4% NPV would be $46,822.37 8% NPV would be -$7,831.63 10% NPV would be -$32,419.23 NPV is calculated by finding the present value of each cash flow, including both cash inflows and outflows, discounted

  • NPV analysis of Jameson Cargile, Inc.

    NPV is just for analysis. B. The YellowJacket is a better choice because the negative NPV is greater than the negative NPV associated with the Bumblebee. C.

  • Internal rate of return

    the discount rate that makes NPV negative. the rate of return that makes the NPV positive. One disadvantage of the NPV method is that: Answer the NPV deals with cash flows.

  • Calculating Net Present Value

    PI= (I+NPV) / I where I=Investment if PI>0 then {(I+NPV) / I}>0 which means NPV> -I meaning NPV>0 where <0> is the limit of I NPV=0={C1 / (1+IRR)}-I={C1 / (1+k)}-I where C1 is the expected future net cash flow that means IRR=K As stated from

View More Related Solutions