Sales volume reaches the maximum capacity, Financial Accounting

Assignment Help:

Sales volume reaches the maximum capacity of the new machine in Year 4.

577_Sales volume reaches the maximum capacity.png

1692_Sales volume reaches the maximum capacity1.png

The positive NPV point to that the investment in Machine Two is financially acceptable although the NPV is so small that there is likely to be a significant possibility of a negative NPV.

WORKINGS

933_Sales volume reaches the maximum capacity2.png

Writing down allowances as well as tax benefits

1920_Sales volume reaches the maximum capacity3.png

(c)

Total taxable cash flow = (48100 + 68214 + 90040 + 113234) = $319588

Total depreciation = $215000

Total accounting profit = 319588 - 215000 = $104588

Average annual accounting profit = 104588/4 = $26147

Average investment = 215000/2 = $107500

Return on capital employed = 100 × 26147/107500 = 24·3%

ROCE of 24·3% is somewhat less than the target ROCE of 25% indicating that buying the machine isn't acceptable with respect to this criterion. though evaluation using the net present value approach is preferred for investment advice.


Related Discussions:- Sales volume reaches the maximum capacity

compare the marginal rates of substitution, Consider two individuals with ...

Consider two individuals with endowments of 60 hours per week of leisure, nonlabour income of $Y per week, and a wage of $7.50.  At this wage assume that workers are constrained by

Disclaimer-liquidation of companies, Disclaimer The liquidator may disc...

Disclaimer The liquidator may disclaim onerous property consisting of: 1.    Land burdened with onerous covenants; 2.    Stocks and shares; 3.    Unprofitable contracts, or 4.

Calculate the total cash flow, Oswald Corporation reported the following in...

Oswald Corporation reported the following information on operations for 2009: Revenue = $2,000 Cost of goods sold = $850 Operating expenses =$395 Depreciation =$248

What is the net cash provided by investing activities, Zoum Corporation had...

Zoum Corporation had the following transactions during 2014: 1. Issued $125,000 of par value common stock for cash. 2. Recorded and paid wages expense of $60,000. 3. Acquired land

Financial accounts, The following items are found in the trial balance of M...

The following items are found in the trial balance of M/s Sharada Enterprise on 31st December, 2000. 10 marks Summer 2013 Sundry Debtors Rs.160000 Bad Debts written off Rs 9000 Dis

Calculate return on assets, Select two of the following firms: Dole Foods,...

Select two of the following firms: Dole Foods, Campbell Soup, Hershey and Dr. Pepper Snapple. Use the 10-K, annual report and other information to answer the following questions.

Ratios, equity share capital rs 10 200 10% preference share capital 80 15%...

equity share capital rs 10 200 10% preference share capital 80 15% debenture 20 profit before interest and taxes 60 proposed dividend 20 provision fo

Associate companies , ASSOCIATE COMPANIES (IAS 28) An associate company i...

ASSOCIATE COMPANIES (IAS 28) An associate company is a company in which the investing company owns more than 20% but less than 50% of the voting rights.  This means that the inve

Revocation, Revocation, alteration and revival of a will 1. A will may ...

Revocation, alteration and revival of a will 1. A will may be revoked or altered by the maker of it at any time when he is competent to dispose of his free property by will.  (

Return on investment, Return on Investment (ROI) - Ratio measure of the pro...

Return on Investment (ROI) - Ratio measure of the profits achieved by a firm by its fundamental operations. An indicator of management's general efficiency andeffectiveness. The si

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd