You are examining an investment opportunity. it would require you to pay money today and then receive payments semi-annually from that investment. since the payments you expect to receive are semi-annual, you would like to know your semi-annual version of your own required return. you require 10% per year. what semi-annual rate (i.e. periodic return per six months) do you require (i.e. need to earn such that this implies 10% earned per year when you get to compound semi-annually)?

5% semi-annual.

Explanation:

Since you require to have a 10% payments from the investment, and the payments are semi-annual, your investment has to have a semi-annual payment of the 5% of the money that you invested in order to be able to reach the 10% annual that you require.

Mohave Corp.

1. The increase in profit if Mohave sells the Rosa Umbrella with the additional decorations is:

= $67,000.

2. Mohave should add the decorations to the Rosa Umbrella.  It makes some profits unlike when the Umbrella is without decorations.

3a. The increase in profit if Mohave sells the Rosa Umbrella with the additional decorations is:

= $63,000.

3b. Mohave should still add the decorations to the Rosa Umbrella.  It makes some profits unlike when the Umbrella is without decorations.

Explanation:

a) Data and Calculations:

                                               Rosa Umbrella   Decorated Umbrella

Estimated demand                       22,000 units          22,000 units

Estimated sales price                   $24.00                   $34.00

Estimated manufacturing cost per unit

Direct materials                             $14.50                   $16.50

Direct labor                                       3.50                       6.00

Variable manufacturing overhead  2.50                       4.50

Fixed manufacturing overhead       5.00                      5.00

Unit manufacturing cost             $25.50                  $32.00

Additional development cost                                  $10,000

Total revenue                         $528,000             $748,000

Total manufacturing cost         561,000                704,000

Additional development costs                                 10,000

Operating profit                      ($33,000)              $34,000

Increase in profit = $67,000 = ($33,000) - $34,000

Decreased Demand to 20,000:

Total revenue                         $528,000             $680,000

Total manufacturing cost         561,000                640,000

Additional development costs                                 10,000

Operating profit                      ($33,000)              $30,000

Increase in profit = $63,000 = ($33,000) - $30,000