60.1K

Verified Solution

Link Copied!

Play Life Products is considering producing toy action figures and sandbox toys. The products require different specialized machines, each costing $1.1 million. Each machine has a five-year life and zero residual value. The two products have different patterns of predicted net cash inflows. Click the icon to view the data.) Calculate the toy action figure project's ARR. If the toy action figure project had a residual value of $125,000, would the ARR change? Explain and recalculate if necessary. Does this investment pass Play Life's ARR screening rule? First, enter the formula, then compute the ARR of the toy action figure project. (Enter amounts in dollars, not millions. Enter your answer as a percent rounded to two decimal places.) Accounting Average annual operating income from asset Initial investment rate of return 71000 + S 1,100,000 6.45 + = = Play Life Products is considering producing toy action figures and sandbox toys. The products require different specialized machines, each costing $1.1 million. Each machine has a five-year life and zero residual value. The two products have different patterns of predicted net cash inflows. (Click the icon to view the data.) Calculate the toy action figure project's ARR. If the toy action figure project had a ssary. Does this investment pass Play Life's ARR screening rule? Data Table First, enter the formula, then compute the ARR of the toy action figure project. (E decimal places.) 2 x . + Average annual operating income from asset 71000 Initial investmel 1,100,000 S S Year Year 1 Year 2 Year 3 Annual Net Cash Inflows Toy action figure Sandbox toy project project .........$ 428,750 $ 500,000 428,750 360,000 428.750 300,000 428.750 270,000 428,750 25,000 Year 4 Year 5 1,455,000 2,143,750 $ Total Play Life will consider making capital investments only if the payback period of the project is less than 3.5 years and the ARR exceeds 8% Print Done

Answer & Explanation Solved by verified expert

See Answer