Question

XYZ is considering a project with an annual cash flow of GH¢ 80,000. The project would have a 10-year life, and the company uses a discount rate of 8 percent. (DF@ N=10, 8% = 6.710). What is the maximum amount the company could invest in the project and have the project still be acceptable (rounded)?\

Select one:

a. GH¢ 406,420.

b. GH¢ 800,000.

c. GH¢ 536,800.

d. GH¢ 727,208.

The ABC Company has fixed costs of GH¢150,000 and variable costs of GH¢9 per unit. If sales price per unit is GH¢12, what is break-even sales in cedis?

Select one:

a. GH¢ 600,000.

b. GH¢ 200,000.

c. GH¢ 480,000.

d. GH¢ 450,000.

A division manager is considering a project that requires a significant initial investment. The company's top management will not approve any project that does not return at least 12%. The manager will most likely use which of the following capital investment models?

Select one:

a. payback period.

b. internal rate of return.

c. net present value.

d. accounting rate of return.

Alajo Industries is considering two capital budgeting projects. Project A requires an initial investment of GH¢ 48,000. It is expected to produce net annual cash flows of GH¢ 7,000. Project B requires an initial investment of GH¢ 75,000 and is expected to produce net annual cash flows of GH¢ 12,000. Using the cash payback technique to evaluate the two projects, Alajo Industries should accept:

Select one:

a. Project B because it has a shorter cash payback period.

b. Project A because it requires a smaller initial investment.

c. Project A because it has a shorter cash payback period.

d. Project B because it produces a larger net annual cash flow.

Answer 1

Solution to the FIRST QUESTION

The maximum amount that the company can invest in the project is the Present Value of the future annual cash flows discounted at the relevant discount rate for the period

Present Value of the cash flows = Annual cash flows x Present value annuity factor at 8.00% for 10 Years

= GHc 8,000 x (DF@ N=10, 8.00%)

= GHc 8,000 x 6.710

= GHc 536,800

Hence, the maximum amount that the company can invest in the project is (c). GHc 536,800

Solution to the SECOND QUESTION

Break-even sales = Total fixed costs / Contribution margin ratio

= GHc 150,000 / [(GHc 12 – GHc 9) / GHc 12]

= GHc 150,000 / [GHc 3 / GHc 12]

= GHc 150,000 / 0.25

= GHc 600,000

The break-even sales is (a). GHc 600,000

NOTE (More than 1 Question)

Hiii, as per the CHEGG guidelines & policy, the experts are advised to answer the first question only when multiple questions were asked. Here, more than one question is asked in a single post and therefore, only the first question have been answered as per the CHEGG guidelines.

Can you please ask the remaining questions separately. Thank You..!!