ACC 560 Week 8 Case 4 Greetings Inc Capital Budgeting Course_Answer

ACC 560 Week 8 Case 4 Greetings Inc Capital Budgeting Course_Answer

ACC 560 Week 8 Case 4 Greetings Inc Capital Budgeting Course_Answer

ACC 560 Week 8 Case 4 Greetings Inc Capital Budgeting Course_Answer

ACC 560 Week 8 Case 4 Greetings Inc Capital Budgeting Course_Answer

ACC 560 Week 8 Case 4 Greetings Inc Capital Budgeting Course_Answer

ACC 560 Week 8 Case 4 Greetings Inc. Capital Budgeting Course

1. Calculate the net present value using the numbers provided. Assume that annual cash flows occur at the end of the year.

Initial investment $800,000
Estimated useful life 5 years
Estimated salvage value -0-

Estimated annual cash flows
Annual cash flow savings for Wall Décor $175,000
Annual additional store cash flow from increased sales 100,000
Sale of ink and paper supplies 10,000
Net annual cash flow $285,000

Present Value
at 12%
Discount factor for 5 periods 3.60478

Present value of net cash flows
$$285,000 X 3.60478 $1,027,362

12%
Present value of net cash flows $1,027,362
Capital investment 800,000
Net present value $ 227,362

2. Mr. Burns is concerned that the original estimates may be too optimistic. He has suggested that you do a sensitivity analysis assuming all costs are 10% higher than expected and that all inflows are 10% less than expected.

Initial investment $880,000
Estimated useful life 5 years
Estimated salvage value -0-

Estimated annual cash flows
Annual cash flow savings for Wall Décor $157,500
Annual additional store cash flow from increased sales 90,000
Sale of ink and paper supplies 9,000
Net annual cash flow $256,500

Present Value
at 12%
Discount factor for 5 periods 3.60478

Present value of net cash flows
$$256,500 X 3.60478 $924,626

12%
Present value of net cash flows $ 924,626
Capital investment 880,000
Net present value $ 44,626

3. Identify possible flaws in the numbers or assumptions used in the analysis, and identify the risk(s) associated with purchasing the equipment.

4. In a one-page memo, provide a recommendation based on the above analysis. Include in this memo: (a) a challenge to store and Wall Decor management and (b) a suggestion on how Greetings stores could use the computer connection for related sales.

For instant digital download of the above solution, Please click on the “PURCHASE” link below to get the tutorial for ACC 560 Week 8 Case 4 Greetings Inc Capital Budgeting Course_Answer

For instant digital download of the above solution or tutorial, please click on the below link and make an instant purchase. You will be guided to the PAYPAL Standard payment page wherein you can pay and you will receive an email immediately with a download link. Please note that in case of technical glitch, the solutions will be emailed to you within 24 hours.

In case you find any problem in getting the download link or downloading the tutorial, please send us an email on mail@edusolutionguide.com