Answer:
Economically speaking, Carl's business outlook is subject to variations in the currency values of the US and China.
Explanation:
- The agreement that Carl plans to propose is sensitive to the fluctuation that occurs if the Chinese Yuan depreciates against the US dollar after he begins selling the bicycle horns, which could result in financial losses for him.
- Thus, whether Carl will gain a profit or suffer a loss hinges entirely on the exchange rates of the two currencies.
True.
The Marketing Control Statement significantly aids marketers by focusing only on controllable costs, allowing them to manage both variable and programmed costs. This knowledge equips them to adjust effectively to achieve an optimal marketing mix that guarantees profitability. Furthermore, it is straightforward to prepare, making it appealing to marketers wanting to avoid the complex jargon of income statements.
Answer:
The primary role of Exotic Craft's marketing division is to guarantee that the company's products are delivered to content customers.
Explanation:
The marketing division holds a crucial dual responsibility; it must ensure customer satisfaction and simultaneously work towards increasing overall sales and market share. The marketing department acts as the public face of the company and strives to represent it in the most favorable light.
A federally insured account has several benefits:
- It is typically more secure due to government-backed insurance; if the account is compromised, the government guarantees reimbursement.
- Creating a joint account is simpler for married couples.
However, there are some downsides:
- The interest rates on these accounts often lag behind inflation, which essentially diminishes the account’s value over time.
- There is a cap of $250,000, meaning any amount above this limit cannot be added to the account.
a. Determine the initial investment tied to replacing the current grinder with the new one.
Initial investment = cost of the new grinder + installation costs of the new grinder - after-tax revenue from selling the old grinder + increase in net working capital.
Cost of the new grinder = $105,000.
Cost to install the new grinder = $5,000.
After-tax revenue from the old grinder = $70,000 - ($70,000 - {$60,000 x (1 - 52%)] x 40%} = $70,000 - $16,480 = $53,520.
Increase in net working capital = $40,000 + $30,000 - $58,000 = $12,000.
Thus, initial investment = $105,000 + $5,000 - $53,520 + $12,000 = $68,480.
b. Assess the incremental operating cash inflows related to the new grinder installation. (Remember to factor in depreciation in year 6.)
New grinder cash flows:
Year 1 = [($43,000 - $22,000) x (1 - 40%)] + $22,000 = $34,600.
Year 2 = [($43,000 - $35,200) x (1 - 40%)] + $35,200 = $39,880.
Year 3 = [($43,000 - $21,120) x (1 - 40%)] + $21,120 = $34,248.
Year 4 = [($43,000 - $12,672) x (1 - 40%)] + $12,672 = $30,868.80.
Year 5 = [($43,000 - $12,672) x (1 - 40%)] + $12,672 + $18,000 (NWC) + $19,934.40 (after-tax salvage value) = $68,803.20.
Old grinder cash flows:
Year 1 = [($26,000 - $11,520) x (1 - 40%)] + $11,520 = $20,208.
Year 2 = [($24,000 - $6,912) x (1 - 40%)] + $6,912 = $15,964.80.
Year 3 = [($22,000 - $6,912) x (1 - 40%)] + $6,912 = $15,964.80.
Year 4 = [($20,000 - $3,456) x (1 - 40%)] + $3,456 = $13,382.40.
Year 5 = $18,000 x (1 - 40%) = $10,800.
Incremental cash flows:
Year 1 = $34,600 - $20,208 = $14,392.
Year 2 = $39,880 - $15,964.80 = $23,915.20.
Year 3 = $34,248 - $15,964.80 = $18,283.20.
Year 4 = $30,868.80 - $13,382.40 = $17,486.40.
Year 5 = $68,803.20 - $10,800 = $58,003.20.
c. Determine the expected terminal cash flow at the end of year 5 from the grinder replacement.
Terminal cash flow = regaining net working capital + after-tax salvage value = $18,000 + $19,934.40 = $37,934.40.
d. Show a timeline displaying the relevant cash flows for the proposed grinder replacement decision.
Year 0 = -$68,480.
Year 1 = $34,600.
Year 2 = $39,880.
Year 3 = $34,248.
Year 4 = $30,868.80.
Year 5 = $68,803.20.
