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Toy World Products is considering producing toy action figures and sandbox toys. The products require...

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Accounting

Toy World 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 $200,000, would the ARR change? Explain and recalculate if necessary. Does
this investment pass Toy World's ARR screening rule?
First, enter the formula, then compute the ARR of the toy action figure project assuming there is no residual value. (Enter amounts in dollars, not millions. Enter your answer as a
percent rounded to two decimal places.)
Accounting
= rate of return
Data table
Toy World 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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