Calculate net present value of this investment opportunity

Assignment Help Accounting Basics
Reference no: EM132107575

Question - Lander Company has an opportunity to pursue a capital budgeting project with a five-year time horizon. After careful study, Lander estimated the following costs and revenues for the project:

Cost of equipment needed

$420,000

Working capital needed

$79,000

Overhaul of the equipment in two years

$27,500

Annual revenues and costs:

 

Sales revenues

$40,000

Variable expenses

$275,000

Fixed out-of-pocket operating costs

$118,000

The piece of equipment mentioned above has a useful life of five years and zero salvage value. Lander uses straight-line depreciation for financial reporting and tax purposes. The company's tax rate is 40% and its after-tax cost of capital is 10%. When the project concludes in five years the working capital will be released for investment elsewhere within the company.

Calculate the net present value of this investment opportunity.

Reference no: EM132107575

Questions Cloud

What is the predetermined overhead rate for upcoming year : The managers of Red Heart Draperies are planning for the upcoming year. What is the predetermined overhead rate for the upcoming year
How much financing will the company need : A company is preparing its cash budget for the first quarter of the year. How much financing will the company need during the quarter
Raising a key accounting issue : Research the issues and then apply the information appropriately using judgement to correctly identify the relevant standards and legislation
How much cash will be collected from customers : The controller has determined that the company collects credit sales as follows: 60% in the month of sale, How much cash will be collected from customers
Calculate net present value of this investment opportunity : The piece of equipment mentioned above has a useful life of five years and zero salvage value. Calculate the net present value of this investment opportunity
Calculate the activity rate : The company produced an average of 40 units per batch and the number of batches produced is 9,000. Calculate the activity rate
What experiences in christines background helped her : Strengths are considered inborn traits that can be enhanced with experience. What experiences in Christine's background helped her develop her strengths?
Describe self-managed work groups and the situations : Describe self-managed work groups and the situations for which they are best suited. Why are self-managed work groups more likely to be found in high involvemen
Access documented procedures for stock control : Also From where can medical administrative staff access documented procedures for stock control.

Reviews

Write a Review

Accounting Basics Questions & Answers

  Prepare a multiple-step income statement for the reed

Prepare a multiple-step income statement for the Reed Company for 2016, showing 2015 information in comparative format

  Record the journal entry to charge materials at standardto

a company produces bird food. during april it produced147 batches of food each batch weighing 100 lbs. to produce this

  Prepare the appropriate entries for federated

Prepare the appropriate entries for Federated from the inception of the lease through the end of the lease term.

  Discuss entertainment expenses and his charitable deductions

On the way to the river, Terry called his tax preparer, Heather friend, CPA and told her that he was not going to the appointment

  Using the following accounts and balances taken from a

using the following accounts and balances taken from a year-end balance sheet compute the current ratio accounts

  In order to accurately assess the capital structure of a

in order to accurately assess the capital structure of a firm it is necessary to convert its balance sheet figures to a

  What is the par value per share of the preferred stock

The stockholders equity section of the balance sheet for Gator Company at December 31, 2013, is as follows:

  Prepare journal entries to record tasha income tax expense

Prepare journal entries to record Tasha's income tax expense for the current year. Show well-labeled supporting computations for the income tax payable

  Foley electronics corporation manufactures and assembles

foley electronics corporation manufactures and assembles electronic motor drives for video cameras. the company

  Casual comfort textiles corporation began january with a

casual comfort textiles corporation began january with a budget for 30000 hours of production in the weaving

  How can the ais help in resolving the problem of ghost

Why should accountants be concerned about threats to payroll fraud. How can the AIS help in resolving the problem of ghost employees

  Create a chart showing the flexible budget variances

Create a chart showing the Flexible Budget Variances and Sales Volume Variances for revenue, costs

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd