You run a mail-order firm, selling upscale clothing. You are considering replacing your manual ordering system...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
You run a mail-order firm, selling upscale clothing. You are considering replacing your manual ordering system with a computerized system to make your operations more efficient and to increase sales. • The computerized system will cost $ 10 million to install and =$ 500,000 to operate each year. It will replace a manual order system that costs $ 1.5 million to operate each year. • The system is expected to last 10 years and will have no salvage value at the end of the period • The computerized system is expected to increase annual revenues from $5 million to $ 8 million for the next 10 years • The cost of goods sold is expected to remain at 50% of revenues • The tax rate is 40% • As a result of the computerized system, the firm will be able to cut its inventory from 50% of revues to 25% of revues immediately. There is no change expected in the other working capital components. The cost of capital is 8%. a. What is your expected cash flow today? b. what are the expected incremental annual cash flows form computerizing the system? c. What is the time-weighted cash flows on this investment? You run a mail-order firm, selling upscale clothing. You are considering replacing your manual ordering system with a computerized system to make your operations more efficient and to increase sales. • The computerized system will cost $ 10 million to install and =$ 500,000 to operate each year. It will replace a manual order system that costs $ 1.5 million to operate each year. • The system is expected to last 10 years and will have no salvage value at the end of the period • The computerized system is expected to increase annual revenues from $5 million to $ 8 million for the next 10 years • The cost of goods sold is expected to remain at 50% of revenues • The tax rate is 40% • As a result of the computerized system, the firm will be able to cut its inventory from 50% of revues to 25% of revues immediately. There is no change expected in the other working capital components. The cost of capital is 8%. a. What is your expected cash flow today? b. what are the expected incremental annual cash flows form computerizing the system? c. What is the time-weighted cash flows on this investment?
Expert Answer:
Answer rating: 100% (QA)
a To calculate the expected cash flow today we need to consider the initial installation cost and the changes in working capital The formula for calcu... View the full answer
Related Book For
Posted Date:
Students also viewed these accounting questions
-
Managing Scope Changes Case Study Scope changes on a project can occur regardless of how well the project is planned or executed. Scope changes can be the result of something that was omitted during...
-
Read the case study "Southwest Airlines," found in Part 2 of your textbook. Review the "Guide to Case Analysis" found on pp. CA1 - CA11 of your textbook. (This guide follows the last case in the...
-
The Crazy Eddie fraud may appear smaller and gentler than the massive billion-dollar frauds exposed in recent times, such as Bernie Madoffs Ponzi scheme, frauds in the subprime mortgage market, the...
-
Implement the queue data structure using arrays of size 10 with the following functions Enqueue () - add {2,3,4,5,6,7,8} to the queue Dequeue() - remove 2 elements isFull() - check if the queue is...
-
An electron and a proton, each initially at rest, are accelerated across the same voltage. Assuming that the uncertainty in their position is given by their de Broglie wavelength, find the ratio of...
-
Assign account numbers (from the list that follows) to the accounts of Clarke Logistics. Jan Marks, Withdrawals Service Revenue Depreciation Expense Numbers from which to choose: Inventory Accounts...
-
A statistics teacher claims that, on the average, 20% of her students get a grade of A, 35% get a B, 25% get a C, 10% get a D, and 10% get an F. The grades of a random sample of 100 students were...
-
The following balance sheet for the Hubbard Corporation was prepared by the company: Additional information: 1. The buildings, land, and machinery are all stated at cost except for a parcel of land...
-
A firm produces a product that has the production cost function C(x) = 260x + 5005 and the revenue function R(x) = 325x. No more than 183 units can be sold. Find and analyze the break-even quantity,...
-
Employees sometimes make mistakes and errors in recording accounting transactions. Is this considered fraud?
-
Q4- Water in piston cylinder system at (T1 and XI). The water is heated isothermally until the (V2-4V1). Then the work is exchanged with system according the low (PV-C) until reach to its original...
-
How do dynamic load balancing algorithms adapt to changing workloads, and what mechanisms do they use to monitor and redistribute load among servers ?
-
Oahu Kiki tracks the number of units purchased and sold throughout each accounting period but applies its inventory costing method at the end of each month, as if it uses a periodic inventory system....
-
What is technological determinism and its relationship to reification? What is reification?
-
Question 24 1 pts Alpaca is a seasoned dealer of securities in the Philippines. For the cursed year 2020, his gross receipts which was directly credited to his bank account amounted to P10B, while...
-
Suppose ABC Ltd. is a South African company that imports Omega Swiss Watches from Switzerland. On 1 November 2022, ABC Ltd. placed an order for 200 Omega watches from the manufacturer in Geneva. ABC...
-
I'm new to machine learning and want to implement a neural network for image classification. What are some high-level steps I should follow, and are there any user-friendly libraries that simplify...
-
Determine the annual percentage yield for a loan that charges a monthly interest rate of 1.5% and compounds the interest monthly.
-
A machine costing $25,000 to buy and $3,000 per year to operate will save mainly labor expenses in packaging over six years. The anticipated salvage value of the machine at the end of six years is...
-
A local government is considering promoting tourism in the city. It will cost $5,000 to develop a plan. The anticipated annual benefits and costs are as follows: Annual benefits: Increased local...
-
At the beginning of the fiscal year, G&J Company acquired new equipment at a cost of $100,000. The equipment has an estimated life of five years and an estimated salvage value of $10,000. (a)...
-
How does electronic commerce differ from EDI? What are the implications of these differences to the control and auditability of a company?
-
A company involved in e-commerce would expect a firewall to do all of the following except: a. Intercept traffic that meets specific criteria and send the traffic back to the originator of the...
-
To obtain evidence that user identification and password control procedures are functioning as designed, an auditor would most likely a. Attempt to sign onto the system using invalid user...
Study smarter with the SolutionInn App