Question

could you plz help me with question number 5, I did question 1 through 4 I hope my answers are correct! you can see the answer it is in excel pic

A с . о EF 1 1) Calculate net present value of store managers Investment Investment Year 0 Year 1 Year 2 Year 3 Total 3 Amount to be invested $(800,000.00) $ (800,000.00) 4 Annual cash Inflow $ 400,000.00 $ 400,000.00 $ 400,000.00 $1,200,000.00 5 Annual cash Outflow $(250,000.00) $(250,000.00) $(250,000.00) $ (750,000.00) 6 Residual value $ 800,000.00 $ 800,000.00 7 Net cash flow (A) $(800,000.00) $ 150,000.00 $ 150,000.00 $ 950,000.00 $ 450,000.00 8 Rate of Return is 16% 9 Present Value factor (B) $ 1.00 $ 0.86 $ 0.74 $ 0.64 10 Present value of net cash flow (A*B)) $(800,000,00) $ 129,310.34 $ 111,474.44 $ 608,624.79 $ 49,409.57 11 Therefore, net present value of investment is $49,410. 13 2) Calculate annual margin, turnover and return on investment. 14 Particulars Amount ($) 15 Sales (A) $400,000 16 Net operating income (B) ($400,000 - $250,000) $150,000 17 Invested assets $800,000 18 Annual margin (D B /A) 37.50% 19 Turnover (E = A/C) 0.5 20 Return on investment ( D E ) 18.75% 21 Therefore, annual margin is 37.50%, turnover is 0.50 and return on investment is 18.75% 23 ) Calculate residual income earned by store manager's Investment for year 1 through 3 assuming required rate of return of 16% a) Annual income from investment = Net sales - Expenses = $400,000 - $250,000 - $150,000 b) Required return = Investment required rate of return - $800,000 16% = $128,000 32 So the residual income for year = Annual Income - Required rate of return - $150,000 - $128,000 - $22,000 per year 36 Therefore, residual income is same for all the year 1 through 3 that is $22,000.

Answer 1

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Answel Part 5 Year Residual Income a Present Value Besent Value factor (22166) 0.86207 $ 18,965.52 $ 27,000 nco $ 22, ovo 0.74 316 $ 16,349.58 $ 22,000 0.640 66 $ 14,094.47 Sino Total Present Value - $ 49,410 o o o o o Net of are Present value computed in (1) & Present value Residual Incomes for year I through 3 equal to each other. Not Present value of Investment (Part 1) - $49,410 Residual Income - $49, 410 Besent value of on