Compute the projects simple rate of return round your final

Assignment Help Accounting Basics

Reference no: EM13572178

Tranter, Inc., is considering a project that would have a five-year life and would require a $3,000,000 investment in equipment. At the end of five years, the project would terminate and the equipment would have no salvage value. The project would provide net operating income each year as follows: (Ignore income taxes.)


Sales			$	3,700,000
Variable expenses				2,200,000

Contribution margin				1,500,000
Fixed expenses:
Fixed out-of-pocket cash expenses	$	500,000
Depreciation		450,000		950,000

Net operating income			$	550,000

Click here to view Exhibit 13B-2, to determine the appropriate discount factor(s) using tables.

All of the above items, except for depreciation, represent cash flows. The company's required rate of return is 14%.

Required:
a.	Compute the project's net present value. (Negative amount should be indicated by a minus sign. Round discount factor(s) to 3 decimal places, intermediate and final answers to the nearest dollar amount. Omit the "$" sign in your response.)

Net present value

b.	Compute the project's internal rate of return. (Round discount factor(s) to 3 decimal places and final answer to the closest interest rate. Omit the "%" sign in your response.)

Internal rate of return

c.	Compute the project's payback period. (Round your answer to 1 decimal place.)

Payback period

years

d.	Compute the project's simple rate of return. (Round your final answer to the closest interest rate. Omit the "%" sign in your response.)

Simple rate of return

Reference no: EM13572178

Questions Cloud

The finney company is reviewing the possibility of : the finney company is reviewing the possibility of remodeling one of its showrooms and buying some new equipment to

This assignment is a way to begin to evaluate how we are : this assignment is a way to begin to evaluate how we are now starting to think more thoughtfully and carefully about

If a firm has the highest priceearnings ratio of any firm : if a firm has the highest priceearnings ratio of any firm in its industry then other things held constant this suggests

Since 2005 publicly traded companies in the european union : since 2005 publicly traded companies in the european union have been required to use ifrs in preparing their

Compute the projects simple rate of return round your final : tranter inc. is considering a project that would have a five-year life and would require a 3000000 investment in

Mary deposits 6000 into an account at the end each quarter : mary deposits 6000 into an account at the end each quarter. if the account earns 10.1 percent per year compounded

Suicide related to teenagers research paper include a : suicide related to teenagers research paperyour paper should1. include a literature review of three scholarly sources

Borderline cafeterias has discovered that most of its wait : borderline cafeterias has discovered that most of its wait staff is white while most of its kitchen staff is minority.

Search current us authoritative accounting literature to : fergusson corporation a u.s. company manufactures components for the automobile industry. in the past fergusson

User Account

All Pages