Dodge, Incorporated acquires 15% of Gates Corporation on January 1, 2011, for $105,000 when the book value of Gates was $600,000. During 2011 Gates reported net income of $150,000 and paid dividends of $50,000.
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What is the discounted payback of a project that has an initial outlay of $20,000 and will generate $6,000 in year 1, $12,000 in year 2, $9,000 in year 3, and $14,000 in year 4 assuming the cost of capital is 10%?
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The Ballentine Company expects sales for June, July, and August of $48,000, $54,000, and $44,000, respectively. Experience suggests that 40% of sales are for cash and 60% are on credit.
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