Answer:
1.Dr Depreciation expense 10,000
Cr Accumulated depreciation-equipment 10,000
2.Dr Salaries expense 1,500
Cr Salaries payable 1,500
3.Dr Interest expense 1,500
Cr Interest payable 1,500
4.Dr Interest receivable 1,333
Cr Interest revenue 1,333
5.Dr Insurance expense 1,500
Cr Prepaid insurance 1,500
6.Dr Supplies expense 700
Cr Supplies 700
7.Dr Sales revenue 2,000
Cr Unearned revenue 2,000
8.Dr Rent expense 1,000
Cr Prepaid rent 1,000
Explanation:
Preparation of Journal entries
1. Based on the information given we were told that Depreciation on office equipment for the year is the amount of $10,000 which means that the Journal entry will be recorded as:
Dr Depreciation expense 10,000
Cr Accumulated depreciation-equipment 10,000
2. Based on the information given we were told that Salaries earned from 16 December to December 31, 2021, were the amount of $1,500 which means that the Journal entry will be:
Dr Salaries expense 1,500
Cr Salaries payable 1,500
3. Based on the information given we were told that On October 1, 2021, they borrowed the amount of $50,000 with an interest note that have to be paid yearly on September 30 at 12% which means that the transaction will be recorded as:
Dr Interest expense 1,500
(50,000*12%*3/12)
Cr Interest payable 1,500
4. Based on the information given we were told that on March 1, 2021, the company borrowed a supplier the amount of $20,000 with an interest of 8% to be paid on February 28, 2022 which means that the transaction will be recorded as:
Dr Interest receivable 1,333
(20,000*8%*10/12)
Cr Interest revenue 1,333
5. Based on the information given we were told that on April 1, 2021, the company paid an the amount of $6,000 to an insurance company for a one-year fire insurance policy which means that the Journal entry will be:
Dr Insurance expense 1,500
(6,000*3/12)
Cr Prepaid insurance 1,500
Since it is a one year fire insurance we subtracted the different between the month of April 1st and December 31st .
Hence,
12 months- 9 months= 3 months
=6,000 x 3/12
= 1,500
6. Based on the information given we were told that the amount of $800 of supplies remained on hand at December 31, 2021 which means that the transaction will be recorded as:
Dr Supplies expense 700
(1,500-800)
Cr Supplies 700
7. Based on the information given we were told that a customer paid the amount of $2,000 in December which means that the transaction will be recorded as;
Dr Sales revenue 2,000
Cr Unearned revenue 2,000
8. Based on the information given we were told that the payment that was made represented rent for December 2021 and January 2022 at the amount of $1,000 per month which means that the Journal entry will be recorded as:
Dr Rent expense 1,000
Cr Prepaid rent 1,000
The CFO is not responsible for which of the following departments?
A. Investor relations.
B. Research and development.
C. Legal.
D. Production.
Answer:
A. Investor relations
Explanation:
The chief financial officer of a company is responsible for maintaining the finances of the organisation. This includes financial planning, risk management, record keeping and financial reporting.
However investor relations has increasingly become part of their job role.
Investor relations requires oversight that emphasises audit accuracy, disclosure, reporting, and compliance practices. This needs a person with financial management background.
So this has become part of the portfolio of the CFO.
An owner of a small firm needs to hire some managers. Assume that each manager has time to
do only one task. Task A is worth $100,000 to the owner, Task B is worth $75,000, and Task C is
worth $50,000. The owner hires only two managers, having one to do Tas A and the other Task
B. What is the opportunity cost of Task B?
Answer:
The opportuniy cost is the cost of forgoing one alternative.
In this case, the opportunity cost of Task B is the value of Task C, which is $50,000.
This is because the owner has hired two managers, one to do Task A, and another to do Task B, which leaves Task C unattended.
The journal entry to record a credit sale is:______.a) cash; service revenue.
b) accounts receivable: sales.
C) accounts receivable: sales return and allowances.
d) cash; sales.
Answer:
b) accounts receivable: sales.
Explanation:
When sales are made on credit, no cash is received, hence, the appropriate entries would be to record expectation of future cash receipt by debiting accounts receivable while sales revenue is credited because sales are recorded when entity has delivered goods to the customer and not necessarily when cash in respect of the sales has been received
For each of the following costs incurred at Northwest Hospital, indicate whether it would most likely be a direct cost or an indirect cost of the specified cost object.Cost Cost Object Direct Cost Indirect CostEx. Catered food served to patients A particular patient x 1. The wages of pediatric nurses The pediatric department 2. Prescription drugs A particular patient 3. Heating the hospital The pediatric department 4. The salary of the head of pediatrics The Pediatric department 5. The salary of the head of pediatrics A particular pediatric patient 6. Hospital chaplain's salary A particular patient 7. Lab tests by outside contractor A particular patient 8. Lab tests by outside contractor A particular department
Answer:
1. Direct Cost
2. Direct Cost
3. Direct Costs
4. Direct Costs
5. Indirect Costs
6. Indirect Costs
7. Direct Costs
8. Indirect Cost
Explanation:
A cost object is where costs accumulates and the value needs to be determined.
Before classifying costs as direct or indirect it is very important to identify the cost object.
Direct costs can be traced directly through observation on the cost object whilst the Indirect costs can not be trace directly to the cost object.
CVP analysis can be used to study the effect of:________a. changes in selling prices on a company's profitability.b. changes in variable costs on a company's profitability.c. changes in fixed costs on a company's profitability.d. changes in product sales mix on a company's profitability.e. All of the answers are correct.
Answer:
e. All of the answers are correct.
Explanation:
Cost Volume Profit (CVP) analysis involves a model of the relations amont the prices of the products, the volume or level of activity, unit variable costs, and the sales mix. The model is used to predict the impact on the profits of changes in those parameters. It is used to study the effects of changes in selling prices on a company's profitability, changes in variable costs on a company's profitability, changes in fixed costs on a company's profitability, and changes in product sales mix on a company's profitability
Give an example of something that is good for one person and bad for someone else.
Answer: Cigarette smoking
Explanation:
Utility is simply defined as the satisfaction or the enjoyment that an individual gets when the individual consumes a particular good.
An individual who smoked cigarette derives satisfaction from it and gets value for his or her money, therefore it's good for him or her. But in the case of someone who doesn't smoke, the person will see cigarette as something bad because it gives disutility to him or her.
If the optimal production lot size decreases, average inventory increases. A. TrueB. Fasle
Answer:
A. True
Explanation:
If the optimal production decreases than the average inventory will increase.
Which of the following is NOT a category of barriers to interpersonal communication?a. individual differences among employeesb. situational factors, such as outside noisec. transmission problems, such as telephone staticd. informal communication networks, such as the grapevine
Answer:
d. informal communication networks, such as the grapevine
Explanation:
Barriers to interpersonal communication are arises when a perosn has lack of self-awareness, Sensitivity, and flexibility. These barriers affect the teamwork and efficiency of each team member and a whole team as well. individual differences among employees, situational factors such as outside noise, and transmission problems, such as telephone static are examples of barriers to interpersonal communication.
Why luxury hotels might have higher variability than the budget hotels. Think about the Hotel Industry and why you might see greater price variability for upscale goods compared to budget items.
Full question attached
Answer:
mean and standard deviation of luxury hotels=145, 27.6
mean and standard deviation of budget hotels=46.1, 5.13
There is higher variability for luxury hotels than budget hotels
Explanation:
Please see attachment for explanation
Manufacturers Southern leased high-tech electronic equipment from Edison Leasing on January 1, 2021. Edison purchased the equipment from International Machines at a cost of $168,120. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) Related Information: Lease term 2 years (8 quarterly periods) Quarterly rental payments $22,500 at the beginning of each period Economic life of asset 2 years Fair value of asset $168, 120 Implicit interest rate (Also lessee's incremental borrowing rate) 88 Required: Prepare a lease amortization schedule and appropriate entries for Manufacturers Southern from the beginning of the lease through January 1, 2022. Amortization of the right-of-use asset is recorded at the end of each fiscal year (December 31) on a straight-line basis.
Complete Question
The complete question is shown on the first uploaded image
Answer:
Now the calculation of this question and its solution is shown on the second and third uploaded image
Explanation:
For this question we will be making use of the excel formula
Now note since the installment is paid at the beginning of each quarter, there will be no interest charged in the first quarter and the whole amount paid will be adjusted against the outstanding lease balance.
Use the expanded accounting equation to compute the missing financial statement amounts.CompanyAssets.=Liability+Owner capital -Owner withdrawals+ Revenues- Expenses1. $64,000 $22,000 $32,000 $0 $? $14,0002. $102,800 $38,000 $56,000 $? $36,000 $24,000What is the revenues amount for company 1 and the owner withdrawals for company 2?
Answer:
1. $24,000
2. $3,200
Explanation:
1. Company Assets = Liability + Owner capital - Owner withdrawals + Revenues - Expenses
64,000 = 22,000 + 32,000 - 0 + revenues - 14,000
Revenue = 64,000 - 22,000 - 32,000 + 14,000
Revenue = $24,000
2. Company Assets = Liability + Owner capital - Owner withdrawals + Revenues - Expenses
102,800 = 38,000 + 56,000 - withdrawals + 36,000 - 24,000
-Withdrawals = 102,800 - 38,000 - 56,000 - 36,000 + 24,000
-Withdrawals = -$3,200.
Withdrawals = $3,200
1. The revenue amount for company 1 is $24,000
2. The owner withdrawals for company 2 is $3,200
The calculation is as follows:
1. Company Assets = Liability + Owner capital - Owner withdrawals + Revenues - Expenses
64,000 = 22,000 + 32,000 - 0 + revenues - 14,000
Revenue = 64,000 - 22,000 - 32,000 + 14,000
Revenue = $24,000
2. Company Assets = Liability + Owner capital - Owner withdrawals + Revenues - Expenses
102,800 = 38,000 + 56,000 - withdrawals + 36,000 - 24,000
-Withdrawals = 102,800 - 38,000 - 56,000 - 36,000 + 24,000
-Withdrawals = -$3,200.
Withdrawals = $3,200
Learn more: https://brainly.com/question/17429689?referrer=searchResults
In the month of June, Bedford Company sold 350 widgets. The average sales price was $34. During the month, fixed costs were $6,320 and variable costs were 40% of sales. Instructions:A. Determine the contribution margin in dollars, per unit, and as a ratio.B. Compute the break-even point in units and dollars.C. How much can sales decline before Bedford Company experiences a loss? D. What would be the sales dollars and number of units sold if Bedford Company wishes to have a target profit of $4,000?
Answer:
Results are below.
Explanation:
Giving the following information:
In June, Bedford Company sold 350 widgets. The average sales price was $34. During the month, fixed costs were $6,320 and variable costs were 40% of sales.
First, we need to calculate the unitary variable cost:
Unitary variable cost= 34*0.4= $13.6
Now, we can determine the contribution margin per unit and the contribution margin ratio:
contribution margin per unit= selling price - unitary variable cost
contribution margin per unit= 34 - 13.6= $20.4
contribution margin ratio= contribution margin per unit/selling price
contribution margin ratio= 20.4/34
contribution margin ratio= 0.6
To calculate the break-even point in units and dollars, we need to use the following formula:
Break-even point in units= fixed costs/ contribution margin per unit
Break-even point in units= 6,320/20.4
Break-even point in units= 310 units
Break-even point (dollars)= fixed costs/ contribution margin ratio
Break-even point (dollars)= 6,320/0.6
Break-even point (dollars)= $10,533
To calculate the margin of safety, we will use the following formula:
Margin of safety= (current sales level - break-even point)
Margin of safety= 350*34 - 10,533
Margin of safety= $1,367
Finally, the desired profit is $4,000:
Break-even point in units= (fixed costs + desired profit) / contribution margin per unit
Break-even point in units= (6,320 + 4,000) / 20.4
Break-even point in units= 506 units
Break-even point (dollars)= (fixed costs + desired profit)/ contribution margin ratio
Break-even point (dollars)= 10,320/0.6
Break-even point (dollars)= $17,200
Pfister Corporation reports Retained Earnings of $8,863 million. This represents: ________.
Answer:
The below options are missing from the question:
a. the total amount of income earned since incorporation less distributions to shareholders
b. the total amount of income earned since incorporation
c. the amount of cash available to distribute to common shareholders
d. a reserve the firm can use to acquire another company
a. the total amount of income earned since incorporation less distributions to shareholders
Explanation:
The retained earnings of $8,863 million is the accumulated net income that the company has realized since it incorporation minus all dividends paid to shareholders since.
Note the formula for determining closing retained earnings is given below:
closing retained earnings=beginning retained earnings+net income-dividends
Holton is a manager at a small restaurant.what can he do to ensure the workplace offers a safe environment for employees?
Answer:
Require all employees to wear slip resistant shoes.
Answer:
warn them of dangers around the kitchen, distribute panphlets than help the workers understand the risks, where to get help in case of an accident and make sure to contact their doctor or 911 as soon as the injury occurs to keep both boss and employee out of serious legal troubles
Although Janet has a Director (Communications) role within Zenith Fine Furnishings for the special project she is working on, her responsibilities include dealing directly with non-management employees and essentially acting as a liaison between management and non-management employees. These responsibilities indicate Janet is serving at which level of management?
a. top-level managet
b. middle-level manager
c. executive manager
d. frontline manager
e. strategeic manager
Answer: b. middle-level manager
Explanation: Middle level managers act as intermediate between the workers and the exec utives as evident in some of the responsibilities of Janet which include: dealing directly with non-management employees and essentially acting as a liaison between management and non-management employees. They are subordinate to and accountable to the senior management but above the lowest levels of operational workers to whom they provide guidance and inspiration to. These thus, is an indication that Janet is serving at the middle-level manager level of management.
A company offers ID theft protection using leads obtained from client banks. Three employees work 40 hours a week on the leads, at a pay rate of $19 per hour per employee. Each employee identifies an average of 4,100 potential leads a week from a list of 5,000. An average of 5 percent of potential leads actually sign up for the service, paying a one-time fee of $70. Material costs are $1,400 per week, and overhead costs are $9,300 per week.
Calculate the multifactor productivity for this operation in fees generated per dollar of input. (Round your answer to 2 decimal places.)
Answer:
3.32
Explanation:
The computation of the multifactor productivity is shown below:
As we know that
Multifactor productivity = Output ÷ Input
where,
Output = (possible leads × no of workers × fee × Conversion percentage)
= 4100 × 3 × 70 × 5%
= $43050
And,
Input is
= Labor cost + Material cost + Overhead cost
where,
Labor cost = 3 × 40 × 19
= $2,280
Material cost = $1,400
And,
Overhead cost = $9,300
So,
Input = $2,280 + $1,400 + $9,300
= $12,980
Now
Multifactor productivity is
= $43,050 ÷ $12,980
= 3.32
Perpetual Inventories The following summary data are from the job order cost sheets of Castle Company: Dates Total costs Assigned Total Production Job Started Finished Shipped at September 30 Costs Added in October 1 9/10 9/20 10/11 $9,000 2 9/17 9/29 10/22 6,600 3 9/25 10/11 10/27 3,500 $7,100 4 9/27 10/19 11/4 4,400 5,700 5 10/14 11/10 11/18 3,200 6 10/23 11/17 11/29 4,900 Using the above data,
compute:
(a) the finished goods inventory at October 1 and October 31,
(b) the work in process inventory at October 1 and October 31, and
(c) the cost of goods sold for October. Castle began operations with Job 1.
a. Finished goods inventory at October 1: ____________
Finished goods inventory at October 31: _____________
b. Work in process inventory at October 1: ___________
Work in process inventory at October 31: ____________
c. Cost of goods sold for October:__________
Answer and Explanation:
The computation of each point is shown below:-
a. The finished goods inventory at October 1 = $9,000 + $6,600
= $15,600
the finished goods inventory at October 31 = $4,400 + 5,700
= $10,100
b. the work in process inventory at October 1 = $3,500 + $4,400
= $7,900
the work in process inventory at October 31 = $3,200 + $4,900
= $8,100
c. the cost of goods sold for October.
Castle start operations with Job 1
= $9,000 + $6,600 + $3,500 + $7,100
= $26,200
the rise and fall of the surface of the ocean is called
the rise and fall on a ocean is called a ' tide '
Use a production possibilities frontier to describe the idea of efficiency.
Answer:
Efficiency
Explanation:
Efficiency is when a market is producing the greatest possible amount given its resources. This is demonstrated by the production possibility frontier, which displays the maximum amount of a good that can be produced in relationship to the production of another good.
Two countries can gain from specialization and trade as long as they have different opportunity costs in the production of some goods.a) trueb) false
Answer:
True
Explanation:
the country with the lower opportunity cost in producing a good is more efficient in production and should specialise in production of that good. While the country with the higher opportunity cost is inefficient in the production of the good and should import from the country with the lower opportunity cost.
Let's illustrate with an example
Scenario A
Country X's opportunity cost in the production of good A = 12 units of B
Country Y's opportunity cost in the production of good A = 2 units of B
Country Y is more efficient and should specialise in the production of good A
Scenario B
Country X's opportunity cost in the production of good A = 12 units of B
Country Y's opportunity cost in the production of good A = 12 units of B
Both countries have the same opportunity cost, so, we can't decide which country should specialise
Incomplete manufacturing costs, expenses, and selling data for two different cases are as follows.(a) Indicate the missing amount. Case 1 2Direct materials used $9,700 $Direct labor 5,100 8,100Manufacturing overhead 8,400 4,100Total manufacturing costs 16,100Beginning work in process inventory 1,100 Ending work in process inventory 3,100Sales revenue 25,000 Sales discounts 2,600 1,500Cost of goods manufactured 17,100 22,100Beginning finished goods inventory 3,400Goods available for sale 22,100 Cost of goods sold Ending finished goods inventory 3,500 2,600Gross profit 7,100Operating expenses 2,800 Net income 5,100
Answer:
Incomplete manufacturing costs:
Case 1 Case 2
Direct materials used $9,700 $3,900
Direct labor 5,100 8,100
Manufacturing overhead 8,400 4,100
Total manufacturing costs 23,200 16,100
Beginning work in process inventory 1,100 9,100
Ending work in process inventory 7,200 3,100
Sales revenue 25,000 31,500
Sales discounts 2,600 1,500
Cost of goods manufactured 17,100 22,100
Beginning finished goods inventory 5,000 3,400
Goods available for sale 22,100 25,500
Cost of goods sold 18,600 22,900
Ending finished goods inventory 3,500 2,600
Gross profit 3,800 7,100
Operating expenses 2,800 2,000
Net income 1,000 5,100
Explanation:
To work out the missing figures involves some manoeuvres of the figures, working up or down as the case may be. For example, to calculate the cost of goods sold in Case 1, I deducted the ending inventory of finished goods from the Goods available for sale. With this figure, it becomes possible to work out the Gross profit and the Net income.
The account balances of Wilson Towing Service at June 30, 2016, follow:Equipment $12,950Office supplies 1,000Notes payable 4,500Rent expense 500Cash 1,400Dividends 5,500Service revenue 12,500Accounts receivable 8,000Accounts payable 10,000Retained earnings June 1, 2016 5,900Salaries expense 2,500Common stock 2,000Required:1. Prepare the income statement for Wilson Towing Service for the month ending June 30, 2016.2. What does the income statement report?
Answer:
Wilson Towing Service
Income Statement
For the month ending June 30, 2016
Service revenue $12,500
Salaries expense ($2,500)
Rent expense ($500)
Operating profit $9,500
The income statement tells us how much profit/loss did a business make during a certain period of time. In this case, the operating profit was $9,500. In order to calculate net income we would need to subtract taxes but we are not given the tax rate or the taxes due.
The primary source of information to be reported about litigation, claims, and assessments is the:_________
Answer:
Client's management
Explanation:
Client's management in business can be explained as the act of maintaining the positive relationship between the client and the company in order to have a productive interaction so that the company can deliver the quality of service required by the client and for lasting relationship between them.
This is important in business to keep your client from getting their service/ product elsewhere. It should be noted that the primary source of information to be reported about litigation, claims, and assessments is the Client's management
Workplace technology is relied upon by businesses to increase _____________. Employee turnover Philanthropy Efficiency and effectiveness Malfunction and futility
Answer:
Workplace technology is relied upon by businesses to increase _____________.
Efficiency and effectiveness
Explanation:
Workplace technology including the use of computer systems, internet, and other communication and information devices has propelled manufacturing and eased communication. Technology has exponentially improved the rate of production and speed at which business occurs. Technology in the workplace has helped factory and administrative workers to become more efficient than ever before with the automation of the many processes. As efficiency is increased, so has effectiveness in the production of desired results been improved tremendously. For instance, a process or set of processes that used to take hours now can take only minutes.
Which of the following is true of the Siemens bribery scandal? a not selected option a It stopped before the investigation began. b not selected option b The CEO was involved and condoned it. c not selected option c It seemed to be a long-term pattern. d not selected option d It was a false accusation. e not selected option e The company never admitted it broke the law with its actions.
Answer:
The true statement about the Siemens bribery scandal is:
b The CEO was involved and condoned it.
Explanation:
The 2008 Siemens scandal was an organized and deliberate effort by the company to bribe government officials in order to secure supply contracts from national governments. It was a worldwide act perpetrated by senior management officials with a long-term pattern. The massive bribery attracted a fine of $160 billion. It seems that bribery is an "embedded business culture in the company."
Which of the following best describes how the Federal Reserve Bank helps
banks during a bank run?
A. The Federal Reserve Bank regulates exchanges to prevent the
demand for withdrawals from rising above the required reserve
ratio.
B. The Federal Reserve Bank has the power to take over a private
bank if customers demand too many withdrawals.
C. The Federal Reserve Bank can provide a short-term loan to banks
to prevent them from running out of money.
D. The Federal Reserve Bank acts as an insurance company that
pays customers if their bank fails.
Answer:
C. The Federal Reserve Bank can provide a short-term loan to banks
to prevent them from running out of money.
Explanation:
Opportunity costs may be viewed only in terms of financial resources.a) trueb) false
Answer:
b) false
Explanation:
Opportunity costs can also be viewed in terms of personal preferences or satisfaction. E.g. a person could legally work all day and all night. Of course no one can actually work that much, but it is possible to work between 16 - 18 hours per day. But by doing so, you will have to lose certain personal benefits like spending time with your family, girl/boy friend, doing things that entertain you, or even going to church if you are very religious (and many other things). People value their personal activities in a different way, and will decide what to do depending on which activity they value most.
The Mugger sells three types of mugs, flowers, dogs, and sports. The following information is available: Flowers Dogs Sports Total Sales Volume 25,000 100,000 50,000Selling Price $20 $25 $10Variable cost per unit 10 20 6Total fixed costs $500,000 REQUIRED: 1. What is the breakeven point for The Mugger? 2. Would you recommend promoting the change in product mix to 4 to 2 to 1 of flower mugs, dog mugs, and sports mugs? Why?
Answer:
See answer below
Explanation:
1. The break even point for flowers = Fixed costs / Contribution margin
Where contribution margin = Selling price per unit - Variable cost per unit
= $500,000 / ($20 - $10)
= $500,000 / $10
= 50,000 units
Therefore,
Break even point for the Mugger is 50,000 units.
Break even points for Dogs = Fixed costs ÷ Contribution margin
= $500,000 / ($25 -$20)
= $500,000 / $5
= 100,000 units
Break even points Sports = Fixed costs / Contribution margin
= $500,000 / ($10 - $6)
= $500,000 / $4
= 125,000 units
2. I can recommend that the mugger should change its product mix from 1:4:2 (Flowers, dogs, sports) to 4:2:1 (Flowers , dogs , sports)
• Because there is an increase in the break even points for each of the mugger.
Why is accounting important?
a) Businesses, regulatory agencies, and the general public use accounting information.
b) Accounting information impacts businesses only.
c) Accounting is important only to those who are majoring in accounting.
Answer:
I belive it is A
Explanation:
I'm not 100 percent sure dude but i leaning towards A
A new furnace for your small factory will cost $45,000 and a year to install, will require ongoing maintenance expenditures of $1,400 a year. But it is far more fuel-efficient than your old furnace and will reduce your consumption of heating oil by 4,200 gallons per year. Heating oil this year will cost $2 a gallon; the price per gallon is expected to increase by $0.50 a year for the next 3 years and then to stabilize for the foreseeable future. The furnace will last for 20 years, at which point it will need to be replaced and will have no salvage value. The discount rate is 12%.a. What is the net present value of the investment in the furnace?b. What is the IRR? (Do not round intermediate calculations.c. What is the payback period? (Do not round intermediate calculations.d. What is the equivalent annual cost of the furnace? (Do not round intermediate calculations.e. What is the equivalent annual savings derived from the furnace?f. Compare the PV of the difference between the equivalent annual cost and savings to your answer to part (a). Are the two measures the same or is one larger?
Answer:
a) NPV = $43,874.65
b) IRR = 24.37%
c) payback period = 5.33 years
d) equivalent annual cost = $6,024.55
e) equivalent annual savings = $13,298.61
f) since the NPV is positive, the equivalent annual savings must be higher than the equivalent annual costs
Explanation:
initial outlay year 0 = -$45,000
net savings year 1 = -$1,400 + (4,200 x $2) = $7,000
net savings year 2 = -$1,400 + (4,200 x $2.50) = $9,100
net savings year 3 = -$1,400 + (4,200 x $3) = $11,200
net savings years 4 - 20 = -$1,400 + (4,200 x $3.50) = $13,300
discount rate = 12%
using a financial calculator:
NPV = $43,874.65
IRR = 24.37%
payback period = 5.33 years
equivalent annual cost = (present value of costs x 12%) / / [1 - (1 + 12%)⁻ⁿ] =[($45,000 + $10,457.22) x 12%] / [1 - (1 + 12%)⁻ⁿ] = $6,654.87 / 0.89633 = $7,424.57
equivalent annual savings = (present value of savings x 12%) / / [1 - (1 + 12%)⁻ⁿ] = ($99,332.87 x 12%) / / [1 - (1 + 12%)⁻ⁿ] = $11,919.94 / 0.89633 = $13,298.61