Compute the annual net cash flows expected from project

Assignment Help Accounting Basics

Reference no: EM132081040

Question: Toying With Nature wants to take advantage of children's current fascination with dinosaurs by adding several scale-model dinosaurs to its existing product line. Annual sales of the dinosaurs are estimated at 80,000 units at a price of $6 per unit. Variable manufacturing costs are estimated at $2.50 per unit, incremental fixed manufacturing costs (excluding depreciation) at $44,000 annually, and additional selling and general expenses related to the dinosaurs at $57,000 annually.

To manufacture the dinosaurs, the company must invest $350,000 in design molds and special equipment. Since toy fads wane in popularity rather quickly, Toying With Nature anticipates the special equipment will have a three-year service life with only a $20,000 salvage value. Depreciation will be computed on a straight-line basis. All revenue and expenses other than depreciation will be received or paid in cash. The company's combined federal and state income tax rate is 40 percent.

Instructions: a. Prepare a schedule showing the estimated increase in annual net income from the planned manufacture and sale of dinosaur toys.

b. Compute the annual net cash flows expected from this project.

c. Compute the following. Assume discounted at an annual rate of 15 percent. Use Exhibit 26-3 and 26-4 where necessary. (Round your "PV factors" to 3 decimal places. Round "Playback period" and "Return on average investment" to 1 decimal places.)

Reference no: EM132081040

Questions Cloud

How will you change and improve : Process uses self-assessment as a primary tool for gaining insight into not only what you (or your organization) have done but what youre doing

Prepare the journal entries to record the sale : Prepare the journal entries to record the sale on November 17 (ignore cost of goods) and collection on November 26, 2016, assuming that the gross method.

Computer technology can be used in project risk management : Discuss one detailed example of how computer technology can be used in project risk management.

What is the ending inventory at the end of each month : What is the ending inventory at the end of each month? Compare the units produced to the units sold and keep a running total

Compute the annual net cash flows expected from project : Toying With Nature wants to take advantage of children's current fascination with dinosaurs by adding several scale-model dinosaurs to its existing product line

Confidence interval for the difference between the two : What is the process for me to give a 95% confidence interval for the difference between the two proportions?

Compute tpw tax basis in the note at the end of the year : TPW, a calendar year taxpayer, sold land with a $535.000 tax basis for $750.000 in February. The purchaser paid $75.000 cash at closing and gave TPW an interest

Determining ?the null and alternative? hypotheses : How do I determine the test statistic Z0 = if I conducted a test at the a =0.10 level of significance by determining ?(a) the null and alternative? hypotheses

What is the appropriate amount of cash : What is the appropriate amount of cash of the 10 equal annual payments? The interest rate is 8% compounded annually

User Account

All Pages