Answer:
c. auditors and financial statement users.
Explanation:
This is because, the auditors and the financial statement users tends to have different views on what their responsibilities are. Since their views differs, their tend to be a gap which occurs. This gap is called audit expectation gap. This could be minimized through self regulating auditing of the financial statement before the final auditing by auditors.
b. No, the NPV calculation will take into account not only the project's cash inflows but also the timing of cash inflows and outflows. Consequently, Project B could have a larger NPV than Project A, even though Project A has larger cash inflows.
c. No, the NPV calculation is based on percentage returns. So, the size of the project's cash flows does not affect a project's NPV.
Answer:
b. No, the NPV calculation will take into account not only the project's cash inflows but also the timing of cash inflows and outflows. Consequently, Project B could have a larger NPV than Project A, even though Project A has larger cash inflows.
Explanation:
The net present value is the present value of after tax cash flows from an investment less the amount invested.
An example:
Suppose there are two projects with a cash outlay of $500.
The cash flow for project A :
Cash flow from year 1 to 3 =$0
Cash flow from year 4 to 7 =$ 500
WACC = 10%
Using a financial calculator, the NPV =$690.78
The cash flow for project B
Cash flow for year one and two =$300
Cash flow for year three = $100
Cash flow for year four and five =$500
WACC = 10%
using a financial calculator, the NPV = $747.76
From this example, even though the cash flow from project A is higher than the cash flow from project B, project B's NPV is higher.
I hope my answer helps you.
Answer:
$9,566.33
Explanation:
We need to determine the present value of the notes receivable using the pv excel function below:
=-pv(rate,nper,pmt,fv)
rate is the interest rate of 12%
nper is the number of years before the amount on the note is received which is 2 years
pmt is the amount of fixed interest(there is no fixed interest in this case)
fv is the future value of the loan in year 2 i.e $100,000
=-pv(12%,2,0,100000)=$79,719.39
Now,after a year 12% interest is applied to the pv:
interest=$79,719.39 *12%=$9,566.33
Answer:
41.28 million
Explanation:
the net present value of the two alternatives needs to be determined. The appropriate alternative would be the plane with the higher NPV
Net present value is the present value of after-tax cash flows from an investment less the amount invested.
NPV can be calculated using a financial calculator
Alternative 1
Cash flow in year 0 = $-100 million
Cash flow each year from year 1 to 5 = $28 million
I = 9%
NPV = $8.91 million
Alternative 2
Cash flow in year 0 = $-132 million
Cash flow each year from year 1 to 10 = $27 million
I = 9%
NPV = $41.28 million
The second alternative has the higher NPV and it would increase the value of the company by $41.28 million if accepted
To find the NPV using a financial calculator:
1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.
2. after inputting all the cash flows, press the NPV button, input the value for I, press enter and the arrow facing a downward direction.
3. Press compute
The question involves determining the Net Present Value (NPV) of each plane's cash flows, discounted at the company's cost of capital. The plane that provides the higher NPV should be selected, with the difference in the two NPV's representing the use value increase for the company.
To decide which project Shao Airlines should accept, we need to determine the Net Present Value (NPV) of each project. The NPV is the sum of the present values of all cash flows associated with a project, discounted at the firm's cost of capital.
For Plane A, the NPV is calculated over its expected life of 5 years. Using the formula for NPV, we get:
NPV A = ($28 million / (1.09)^1) + ($28 million / (1.09)^2) + ($28 million / (1.09)^3) + ($28 million / (1.09)^4) + ($28 million / (1.09)^5) - $100 million
Similarly, Plane B's NPV is calculated over 10 years. Since Shao Airlines plans to serve the route for only 10 years, it means Plane A will have to be purchased twice. Therefore, a similar NPV formula applies, but for 10 years and accounting for the double cost:
NPV B = 2 × [($27 million / (1.09)^1) + ($27 million / (1.09)^2) + ... + ($27 million / (1.09)^10)] - 2×$132 million
The project with the higher NPV should be accepted, and its NPV relative to the alternative represents the value increase for the company.
Learn more about Net Present Value here:
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Answer:
tactical
Explanation:
"Planning" is a very important process in order for a business to know how it is going to allocate and manage its resources to achieve its goals in a more organized way.
Among the planning options mentioned, Puma uses "tactical plans" in order to achieve its goal. Such type of plan is focused on a specific goal. In the case of Puma, it is focused on achieving $641 million in its sales target.
Tactical plans also include "when" or the time in which goals are going to be achieved. Most of the time, goals are set from less than a year to one year. In Puma's case, it's goal is by the end of the year.
Tactical plans also state the strategies that the company will use in order to achieve its goal. In order for Puma to increase its sales, it will be introducing new products, sell soccer equipment and combine different subsidiaries. These strategies will help Puma accomplish its mission.
So, this explains the answer.
Puma implemented strategic sales plans based on new product introduction, sale of soccer equipment, and subsidiary consolidation to increase its end-of-year sales target by $641 million post World Cup soccer games.
Based on the question posed, Puma adopted strategic sales plans to increase revenue by $641 million following the World Cup soccer games. These Sales plans were driven around three major strategies; Introducing new product categories, focusing on sales of soccer equipment, and consolidating several company subsidiaries. Introduction of new products would attract more customers and help increase sales. Focusing more on sale of soccer equipment during the World cup period helps to capitalize on the increased demand for such products. Lastly, consolidation of subsidiaries can minimize costs and improve efficiency, leading to an increase in sales.
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Answer:
The US has absolute advantage in making cars. An additional worker makes 5 times higher cars than a Mexican worker.
Explanation:
The US has the absolute advantage than Mexico in making both products since its Marginal Product of Labor (MPL) (i.e. the number cars that an additional worker produces) is higher. The US also enjoys absolute advantage because it incurs less cost in making car (or even airplane) than does Mexico in making either car (or even airplane). One can then conclude that the US has the absolute advantage in the making of cars.
Answer:
FDI
Explanation:
Foreign direct investment (FDI) is an investment from a party in one country into a business or corporation in another country with the intention of establishing a lasting interest. Lasting interest differentiates FDI from foreign portfolio investments, where investors passively hold securities from a foreign country. A foreign direct investment can be made by obtaining a lasting interest or by expanding one’s business into a foreign country.