Please answer thoroughly and deeply

Subject:ManagementPrice: Bought3

Share With

Please answer thoroughly and deeply.

 

Questions

1. Describe the scarce resources faced by a business owner.
2. What is the point of a cost-benefit analysis and what are three tools that can be used to perform it?
3. What are three cost-benefit analysis tools a business can use?
4. What are some advantages of these tools?
5. What are some disadvantages of these tools?

 

Exercises/Problems

1. Identify whether each of the following should be considered an investment amount or stream of profits when conducting a cost-benefit analysis.

 

	Investment Amount or Stream of Profits
A business spends $10,000 to purchase a new machine.
A bank lends a business $50,000 for the purchase of a dump truck.
An investor receives dividend payments.
A company purchases a new computer system.
A company upgrades its existing cash registers.
A company realizes a savings from the operation of the new computer system.
Profits increase after a new phone system is installed.
Net income decreases.
Sales increase by $2,000 per month after a new salesperson is hired.
A lender is repaid.
An investor recoups her investment in a startup.

 

 

1.  
   1. The Family Kitchen restaurant currently makes profits of $85,000 per year. They are considering an expansion opportunity that will increase their profits to $110,000 per year. Which profits should they consider when conducting a cost-benefit analysis?
   2. Jones Landscaping invests $5,000 in a new lawn tractor and expects to earn an additional $1,250 per year from the use of this tractor. The tractor is expected to last 7 years. Calculate the ROI. Calculate the payback period. What does this tell you?
   3. Computer support services currently cost ABC corporation $100,000 per year. Next World Computer services has proposed to provide these same computer support services to ABC corporation for $80,000 per year. There is a one-time cost of $75,000 associated with transferring the files and training staff.

•  
  •  
    • What is the investment amount?
    • What are the annual benefits?
    • What are the total profits over 5 years?
    • What is the ROI over 5 years?
    • What is the payback period?