8. Scenario analysis Kiosk Corp. produces vending machines and places them in public buildings. The company...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
8. Scenario analysis Kiosk Corp. produces vending machines and places them in public buildings. The company has obtained permission to place one of its machine in a local library. The company makes two types of machines. One distributes soft drinks, and the other distributes snack foods. Kiosk expects both machines to provide benefits over a 12-year period, and each has a required investment of $5,120. The firm uses a 6.49% cost of capital. Management has constructed the following table of estimates of annual cash inflows for pessimistic, most likely, and optimistic results. (Click on the icon here in order to copy the contents of the data table below into a spreadsheet.) Initial investment (CFO) Outcome Pessimistic Most likely Optimistic Soft drinks Snack foods $5,120 $5,120 Annual cash inflows (CF) $540 $420 730 1,020 730 1,190 a. Determine the range of annual cash inflows for each of the two vending machines. b. Construct a table of the NPVs associated with each outcome for both machines. c. Find the range of NPVs, and subjectively compare the risks associated with these machines. a. The range of annual cash inflows for the soft drink machine is $ The range of annual cash inflows for the snack foods machine is $ (Round to the nearest dollar.) (Round to the nearest dollar.) b. Complete the NPV table below for the soft drink machine: (Round to the nearest cent.) Outcome Pessimistic Most likely Optimistic NPVs Soft drinks $ Complete the NPV table below for the snack foods machine: (Round to the nearest cent.) Outcome Pessimistic Most likely Optimistic NPVs Snack foods $ c. The range of NPVs for the soft drink machine is $ (Round to the nearest cent.) The range of NPVs for the snack foods machine is $ (Round to the nearest cent.) Bead art no ser & jong machine has both a greater potential loss and a (Select from the drop-down menus.) Each vending machine has the same (1). result. The (2) greater potential return. Therefore, the decision will depend on the risk disposition of management. (1) pessimistic (2) snack foods O most likely soft drink optimistic 8. Scenario analysis Kiosk Corp. produces vending machines and places them in public buildings. The company has obtained permission to place one of its machine in a local library. The company makes two types of machines. One distributes soft drinks, and the other distributes snack foods. Kiosk expects both machines to provide benefits over a 12-year period, and each has a required investment of $5,120. The firm uses a 6.49% cost of capital. Management has constructed the following table of estimates of annual cash inflows for pessimistic, most likely, and optimistic results. (Click on the icon here in order to copy the contents of the data table below into a spreadsheet.) Initial investment (CFO) Outcome Pessimistic Most likely Optimistic Soft drinks Snack foods $5,120 $5,120 Annual cash inflows (CF) $540 $420 730 1,020 730 1,190 a. Determine the range of annual cash inflows for each of the two vending machines. b. Construct a table of the NPVs associated with each outcome for both machines. c. Find the range of NPVs, and subjectively compare the risks associated with these machines. a. The range of annual cash inflows for the soft drink machine is $ The range of annual cash inflows for the snack foods machine is $ (Round to the nearest dollar.) (Round to the nearest dollar.) b. Complete the NPV table below for the soft drink machine: (Round to the nearest cent.) Outcome Pessimistic Most likely Optimistic NPVs Soft drinks $ Complete the NPV table below for the snack foods machine: (Round to the nearest cent.) Outcome Pessimistic Most likely Optimistic NPVs Snack foods $ c. The range of NPVs for the soft drink machine is $ (Round to the nearest cent.) The range of NPVs for the snack foods machine is $ (Round to the nearest cent.) Bead art no ser & jong machine has both a greater potential loss and a (Select from the drop-down menus.) Each vending machine has the same (1). result. The (2) greater potential return. Therefore, the decision will depend on the risk disposition of management. (1) pessimistic (2) snack foods O most likely soft drink optimistic
Expert Answer:
Answer rating: 100% (QA)
a The range of annual cash inflows for the soft drink machine is 480 1020 540 ... View the full answer
Related Book For
Principles of Managerial Finance
ISBN: 978-0134476315
15th edition
Authors: Chad J. Zutter, Scott B. Smart
Posted Date:
Students also viewed these accounting questions
-
Brummitt Corporation, is evaluating a new 4 - year project. The equipment necessary for the project will cost $ 2 , 8 5 0 , 0 0 0 and can be sold for $ 3 1 5 , 0 0 0 at the end of the project. The...
-
Kiosk Corp. produces vending machines and places them in public buildings. The company has obtained permission to place one of its machines in a local library. The company makes two types of...
-
Automated Food Distribution Corp. (AFDC) produces vending machines and places them in public buildings. The company has obtained permission to place one of its machines in a local library. The...
-
Discuss the two-pipe system, how it works, and its advantages and disadvantages.
-
Why is the order of separation based on size opposite for gel filtration and gel electrophoresis, even though they often use the same compound to form the matrix?
-
Moss Exports is having a bad year. Net income is only $60,000. Also, two important overseas customers are falling behind in their payments to Moss, and Mosss accounts receivable are ballooning. The...
-
Additional Contribution Margin and Fixed Costs The following data apply to Frelm Corporation for a given period: {Required:} Frelm wants to sell an additional 50,000 units at the same selling price...
-
Open the Adalene Solution.sln file contained in the VB2017 Chap12 Adalene Solution folder. The application is already connected to the Adalene.mdf file, and the AdaleneDataSet has already been...
-
On a standardized test of mathematical ability that is given to all grade 6 students across Canada, Kim scored a 40, and John scored a 30. Both Kim and John are in the same class, which has 40...
-
For background purposes, the company was started by recent college grads who wanted to provide information on budgeting and debt management to the younger generation because the information was not...
-
Suppose a team of internal auditors for a large construction company completed their review of internal controls on an audit of one projects construction costs. The preliminary survey and review of...
-
List the three primary types of follow-up plans. Explain each one and discuss the advantages and disadvantages of each.
-
An owner-manager of a medium-sized business was overheard by an internal auditor to claim, "My company's control system cannot be beaten." What information should the internal audit department...
-
Why prepare a working paper index before an audit begins?
-
What is the primary factor governing the nature and extent of audit follow-up? Explain.
-
In this case study, an ecommerce website is considered. In this website, when customers choose items of interest to purchase, they go to their shopping cart. When they are ready to proceed with their...
-
Pappa's Appliances uses the periodic inventory system. Details regarding the inventory of appliances at January 1, purchases invoices during the year, and the inventory count at December 31 are...
-
Define contribution margin. Is it best expressed as a total amount or as a per-unit amount? In what way is the term descriptive of the concept it represents?
-
Patricks Bakery Shop has fixed costs per month of $3,600, and variable costs are 55% of sales. What amount of monthly sales allows the shop to break even?
-
Quality Car Wash has fixed costs per month of \($16,800,\) and variable costs are 20% of sales. The average amount collected per car washed during the past year has been \($5.\) How many cars must be...
Study smarter with the SolutionInn App