# 1 Question 1 Awesome Gadget, INC is considering making an

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Hi Solver, please see attached spreadsheet. Best Regards, Bibi Bibi – Solver.xlsx 1 Question 1 Awesome Gadget, INC is considering making an additional investment of in its production capabilities. It has collected data on the current year’s (year 0) revenue, costs and quantity sold. The price per unit will be decreased 10% annually (year-1 unit price will be 10% less than the present (year 0) price, etc.) COGS per unit produced is forecast to decrease 5% annually (cost per unit in year-1 will be 5% less than the present unit cost, etc.) costs will increase due to a new salaried technician in all years. No other change is forecast for S.G.& A. Depreciation and Fixed working capital for each year areyear proposal income statement (only) for years 1-3 using items from the following data block as Using this data, prepare a three to be as shown in the data block. needed. The income statement must be in the standard accounting sequence and contain appropriate subtotals and totals. Years 0 1 2 3 Unit Price \$199.00 Annual % price decrease 10.00% Unit COGS \$107.50 Annual % COGS decrease 5.00% New salaried technician \$100,000 \$110,000 \$120,000 Investment \$350,000 Forecasted sales quantities 340,000 540,000 1,000,000 Working capital \$750,000 \$775,000 \$725,000 \$675,000 Depreciation \$510,000 \$460,000 \$400,000 Income Tax rate 14.00% Capital Gains tax rate 10.50% MARR 20.00% 2 An investment committee has narrowed down their investment decision to three proposals. Further information was collected on these three proposals and the investment amounts, estimated annual cash flows, and estimated salvage values are shown Use a MARR of 15% and a three year Determine which one maximizes the financial worth of the company using the internal rate of return criterion only. below. time horizon The committee only considers the IRR criterion. Proposal Investment A1 A2 A3 MARR Years 3 (\$1,250,000) (\$1,050,000) (\$1,750,000) Year 2 Year 3 \$640,000 \$500,000 \$700,000 \$250,000 \$600,000 \$800,000 Salvage in last year \$300,000 \$350,000 \$750,000 15.0% 3 Customers-R-Us, LLC had sales and costs as shown below in 2013. Any data that is not listed should be considered as zero. Note that the parts are produced in lots of 10,000, so the setup costs are incurred each time that 10,000 parts needs to be produced. a What total costs (variable plus fixed) will be incurred in 2013? b What profit will be achieved in 2013 c What is the break even quantity in 2013? If the quantity, fixed cost and the variable costs stay the same and only the price is changed, what price would have to be charged to d earn profits of \$250,000? 2013 30,000 \$23.50 \$1.75 \$4.25 10,000 \$500.00 \$450,000 Sold units Unit Price Material Cost each Labor cost each Lot size Setup cost per lot Annual Fixed Cost 4 Year 1 \$970,000 \$480,000 \$650,000 Awesome Gadget, Inc. is considering a new internal quality improvement program called ISO-9001. A proposal income statement and some additional data are shown below. Benefits are expected in three area. The ISO-9001 registration should increase sales. Total COGS is expected to stay constant even though sales increases. This proposal with require a enable a decrease in record keeping are defined below. And the improved quality willone-time investmentin inventory. Thesesoftware, added staff in all years, and substantial training expenses in year 1 and smaller amounts in later years. The software is to be depreciated using straight line depreciation over 3 years ( salvage value and book value in year 3 is zero). The other costs of balances for the various working capital categories The expected the implementation will be expensed as S.G.& A. are listed below. The Income statement is shown below. Determine the present worth and internal rate of return for the ISO-9000 proposal. Year 0 1 2 3 \$360,000 Software Investment \$120,000 \$120,000 \$120,000 Depreciation \$300,000 \$400,000 \$600,000 Forecasted sales revenue \$150,000 Added st