ACCT210 Final Exam Complete Solution

Question: #341

Accounting 210 – Final Exam Bonus Problem (worth 25 points)

Name: ____________________________________________
Answer all parts: Namerof Manufacturing, Inc. is considering purchasing three machines. Each machine costs $8,000 and will product cash flows as follows:

End of                                      Machine
Year           A                      B                      C

   1        $5,000        $1,000        $4,500
   2        $4,000        $2,000        $3,000
   3        $2,000        $11,000        $2,200

Namerof uses the net present value method to make investment decisions and requires a 15% annual return on its investments.

If Namerof is limited to one investment per year, which machine, if any, should the company purchase?

If Namerof is not limited to one investment and will invest as long as its hurdle rate is achieved, which machine, if any, should the company purchase? Why?

If Namerof used the payback period method and could only invest in one machine, which would they choose. Do you think this would yield the most value for their investment? (Why/why not?)

Solution: #359

Accounting 210 – Final Exam Complete Solution Bonus Problem

One way that a company can remain close to the needs and wants of its customers is by developing a new product. This paper highlights the entry into the market of a new product by Diesel, a subsidiary of L’Oreal Cosmetic Company. The product is a new hair gel not recognized like other brands of Diesel. It will be under the L’Oreal Company, a global cosmetic stable that will be instrumental in promoting and marketing it. The market disposition of diesel fronts it as a luxury brand mainly cherished by those who prefer the quality and comfort, particularly those aged between 20 and 25 from the medium and high class. In...