RSF 3 CHAPTER 3 Flashcards

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psychology

Explain cognitive behavioral action-oriented therapies.

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accounting

Argile Textiles is evaluating a new product, a silk/wool blended fabric. Assume that you were recently hired as assistant to the director of capital budgeting, and you must evaluate the proposed project.

The fabric would be produced in an unused building located adjacent to Argile's Southern Pines, North Carolina, plant; Argile owns the building, which is fully depreciated. The required equipment would cost $200,000, plus an additional $40,000 for shipping and installation. With the new project, inventories would rise by $25,000, and accounts payable would increase by $5,000. All of these costs would be incurred at $t=0$ . By a special ruling, the machinery could be depreciated under the MACRS system as 3-year property.

The project is expected to operate for four years, and then be terminated. The cash inflows are assumed to begin one year after the project is undertaken, or at $t=1$ , and to continue to $t=4$ . At the end of the project's life $(t=4)$ , the equipment is expected to have a salvage value of $25,000.

Unit sales are expected to total 100,000 five-yard rolls per year, and the expected sales price is $2 per roll. Cash operating costs for the project (total operating costs excluding depreciation) are expected to amount to 60 percent of dollar sales. Argile's marginal tax rate is 40 percent, and its required rate of return is 10 percent. Tentatively, the silk/wool blend fabric project is assumed to be of equal risk to Argile's other assets.

You have been asked to evaluate this project and to make an accept/reject recommendation. To guide you in your analysis, your boss has asked you to answer the following set of questions.

(1) Define the term net present value. What is the proposed project's NPV?

(2) What is the rationale behind the NPV method? Based on the results of your NPV analysis, should Argile accept the project?

(3) Would the NPV change if the required rate of return (WACC) changed? Explain.

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accounting

With good internal controls, the person who handles cash can also a. account for cash payments. b. account for cash receipts from customers. c. issue credits to customers for sales returns. d. None of the above

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business

Random sampling from two normal populations produced the following results: