Homework Answers
11. Option D
Total cost = fixed costs+ Variable costs
Total cost of manufacturing = 12000+(800*7)= 17600
Total cost of outsourcing = 8000+(800*15)= 20000
Decrease in operating income by $2400 (20000-17600)
14. Option B
Investment to be recovered after years will be (502000-122000-158000-160000)= 62000
So payback period = 3 years + (62000/160000)= 3.39 years
15. Option B
Average income = (38000+29000+25000+22000+0)/5 = 22800
Average depreciation= 54000-12000 / 5 = 8400
ARR = average income - average depreciation/ initial investment = (22800-8400)/54000= 26.67% (near to it is 26.10%)
16. Option B
Present value of cash inflows= annual cash inflows* pvifa (9%,5years)= 100000*3.240 = $324000
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