Compute the net present value of this project

Assignment Help Financial Accounting
Reference no: EM133036514

Question - Lupace Corporation is planning to produce a grading machine for use in finance courses around the globe. Market research data indicate that the company will be able to sell 10,000 grading machines per year at $1,500 each for the next 6 years, after which the new model will have to be developed. The product will be produced in a section of an existing factory that is currently not in use. To produce grading machines, Lupace must invest in acquiring specialized equipment that costs $1,000,000. This equipment has an expected life of ten years. After six years, the equipment could be sold for $30,000. Lupace will depreciate the equipment over ten years using the straight-line method. In addition to the cost of the equipment, the company will incur annual incremental manufacturing costs of $370,000 for component parts, $500,000 for direct labor, and $200,000 of miscellaneous costs. Lupace has a tax rate of 20 percent, and the company's required rate of return is 15 percent.

Required -

a. Compute the Net Present Value of this project.

b. Should Lupace make the investment required to produce these grading machines?

Reference no: EM133036514

Questions Cloud

Prepare entries on appropriate dates to record declaration : The dividend is paid on December 31. Prepare the entries on the appropriate dates to record the declaration and payment of the cash dividend
Assignment-employee motivation and performance : Employee Motivation and Performance seeks to look at how best employees can be motivated in order to achieve high performance within a company or organization.
What information should the review report contain : What information should the review report contain? What should O'Neil do if she finds there was a material departure from GAAP
MOD007190 Digital Business and Principles of Marketing : MOD007190 Digital Business and Principles of Marketing Assignment Help and Solution, Anglia Ruskin University -Assessment Writing Service
Compute the net present value of this project : To produce grading machines, Lupace must invest in acquiring specialized equipment that costs $1,000,000. Compute the Net Present Value of this project
Policy change in african continental free trade area : Assess and discuss the latest policy change in respect to the African continental free trade area (ACFTA) transportation needs
Did the analyst prediction prove correct : An analyst predicted last year that the stock of Mallard Inc. would offer a total return of at least 8% in the coming year. Did analyst prediction prove correct
Describe organizational domain : There are two options for this discussion board. Choose one for your initial post and the opposite one to respond to your classmates.
Calculate the project NPV using a discount rate : Thus, in year 9 the investment cash inflow totals $4,600,000. Calculate the project's NPV using a discount rate of 8 percent

Reviews

Write a Review

Financial Accounting Questions & Answers

  Financial statement analysis and preparation

Financial Statement Analysis and Preparation

  Shareholder of a company

Describe the ways that a person can become a shareholder of a company. Why Wal-Mart would split its stock?

  Financial and accounting principles

An understanding of financial and accounting principles can be a valuable tool for managers. While not all managers will find themselves calculating financial ratios or preparing annual financial data.

  Prepare a statement of cash flow using the direct method

Prepare a Statement of Cash Flow using the Direct Method and Prepare the Operations section of the Statement of Cash Flow using the Indirect Method.

  Financial accounting assignment

This assignment has one case study and two question apart from case study. Questions related to document Liquidation question and Company financial statements question - Torquay Limited

  Prepare general journal entries for goela

Prepare general journal entries for Goela Ltd

  Principles of financial accounting

Prepare the journal entry to record the acquisition of the assets.

  Prepare general journal entries to record the transactions

Prepare general journal entries to record the transactions, assuming use of the periodic inventory system

  Global reporting initiative

Compare the view espoused by the economist Milton Friedman about the social responsibilities of business with the views express by Stigler.

  Explain the iasb conceptual frameworks

Explain the IASB Conceptual Framework's perspective of users and their decisions.

  Determine the company''s financial statements

T he focus of the report is to determine the extent to which you are comfortable relying on the financial statements as presented by management .

  Computation of free cash flow

Computation of Free Cash Flow

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