Reference no: EM133127436
Question - King Kong Company is considering a project that would have a eight-year life. The investment required to get the project underway will amount to $2,400,000 in machinery. At the end of the period (eight years) the project would be terminated and the equipment fully depreciated with no salvage value. The project would provide net operating income each year as follows:
Sales $3,000,000
Variable expense 1,800,000
Contribution margin 1,200,000
Fixed expenses
Advertising, salaries etc. 700,000
Depreciation 300,000
Total fixed expenses 1,000,000
Net operating income 200,000
The company's discount rate is 10%
Required -
-Compute the annual net cash inflows for the project.
-Compute the projects net present value and come to a decision.
-Find the project's internal rate of return.
-Compute the projects payback period.
-Compute the project's simple rate of return.
-If the discount rate as 16%, what would the net present value if the investment was $2,200,000?
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