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Toy Universe 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. E: (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 $225,000, would the ARR change? Explain and recalculate if necessary. Does this investment pass Toy Universe's ARR screening rule? i X 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 decim - Data Table Accounting Average annual operating income from asset Initial investment = rate of return 123,000 $ 1,100,000 11.18 % Year If the toy action figure project had a residual value of $225,000, would the ARR change? Year 1 If the toy action figure project had a $225,000 residual value, the ARR would change. Annual Net Cash Inflows Toy action figure Sandbox toy project project $ 343,000 $ 520,000 343,000 340,000 343,000 320,000 343,000 230,000 343,000 25,000 Year 2 The residual value would cause the yearly depreciation expense to decrease , which will cause the average annual operating income from the investment to increase Year 3 Year 4 Compute the ARR of the toy action figure project with a residual value of $225,000. (Enter your answer as a percent rounded to two decimal places.) Year 5 The ARR of the toy action figure project with a residual value of $225,000 is %. $ 1,715,000 $ 1,435,000 Total Toy Universe will consider making capital investments only if the payback period of the project is less than 3.5 years and the ARR exceeds 8%

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