Solution-Calculate Net Present Value of the project

Calculate Net Present Value of the project

Assignment Help Accounting Basics

Reference no: EM133007288

Question - Investment decision making and Financing of Businesses - Chicken Spot sells takeaway chicken and related products. The manager is considering acquiring an advanced new oven which will substantially reduce the time required to cook chicken and would also enable the store to diversify into the sale of pizza.

The cost of the new oven is $40,000 and it is estimated the oven will be sold for $5,000 at the end of its useful life.

Chicken Spot has estimated the oven will have a useful life of three years, and will influence annual cash ?ows as follows:

Year	Annual Cash flows	Present Value (PV)
1	$19,200	$17,142.86
2	$19,200	$15,306.12
3	$24,200 ($19,200 cash flow + $5,000 sale of oven)	$17,225.08
TOTAL		$49,674.06

Chicken Spot management prefer projects with a payback period of less than 3 years.

Required -

(i) Calculate the Net Present Value of the project.

(ii) Calculate the Payback Period (PP) of the project.

(iii) Based on your calculations of NPV and PP, should the management of Chicken Spot proceed with the purchase of the oven? Why?

Reference no: EM133007288

Questions Cloud

How to write a coach request message : How to write a coach request message - Tourism and Hospitality fields. All coaches are suitable, and can offer some employability advice

Happy workers are more productive workers : "Happy workers are more productive workers". Explain why this statement might be true by exploring the relationship between 'job satisfaction' and 'job performa

How lower relative australian national income would impact : How lower relative Australian national income would impact the Australian dollar (AUD), ceteris paribus. Your answer must include the role of the actions

Which is a disadvantage of a fee for service reimbursement : Which is a disadvantage of a Fee for Service reimbursement method compared to Capitation? Increases in volume increase costs and in turn decrease profits.

Calculate Net Present Value of the project : The cost of the new oven is $40,000 and it is estimated the oven will be sold for $5,000 at the end of its useful life. Calculate the Net Present Value

Make the necessary consolidation journal entries for rip ltd : Make the necessary consolidation journal entries for Rip Ltd group for the year ended 30 June 2021 regarding these intra-group transactions and balances.

Which would increase mercy reimbursement for treating : Which would increase Mercy's reimbursement for treating the patient? Mercy Hospital is a rural hospital. A patient has been diagnosed.

Products and services on three levels : Product planners need to think about products and services on three levels: the core customer value, actual product, and augmented product.

Calculate depreciation expense for the life of the asset : Calculate depreciation expense for the life of the asset under double diminishing-balance method. (Round answers to 0 decimal places, e.g. 5,276.)

User Account

All Pages

Calculate Net Present Value of the project

Reference no: EM133007288

Reference no: EM133007288

Questions Cloud

Reviews

Write a Review

Accounting Basics Questions & Answers

How much control does fed have over this longer real rate

Coures:- fundamental accounting principles

Accounting problems

Theory of interest - term structure of interest rates

Write a report on internal controls

Prepare the bank reconciliation for company

Cost-benefit analysis

Theory of interest

Liquidity and profitability

What is the expected risk premium on the portfolio

Simple interest and compound interest

Capm and venture capital

Assured A++ Grade

Academics

Major Subjects

Majors

Get In Touch

TERMS & POLICIES

HELP & SUPPORT