Demonstrate what is the profitability index of the project

Assignment Help Financial Accounting
Reference no: EM132592295

The Mitec Inc. is planning to purchase a new production machine. The startup cost of purchasing and installing the machine is $1,000,000. The machine will generate revenue of $500,000 each year for the next 10 years, and all costs including costs of raw materials, labor, utilities, and taxes are $300,000 per year. The machine will require maintenance at the end of every two years, costing $100,000 each time. At the end of the ten years, the company needs to spend $50,000 to divest the machine. The cost of capital for this project is 6%.

Question 1: What is the profitability index of this project?

Reference no: EM132592295

Questions Cloud

Demonstrate what was the return on equity : Leveraged Corporation has a total debt to assets ratio of 65%. Its net income last year $50,000. If the total debt was $200,000, what was the return on equity
How far from the throwing point will the baseball attain : How far from the throwing point will the baseball attain its original level?
What is density of quantum states of energy : What is density of quantum states of energy?
What is the surface area of the object : An object has emissivity 0.963, temperature 363 K, and a heat absorption rate of 1.8 W in a room of temperature 288 K.
Demonstrate what is the profitability index of the project : What is the profitability index of this project?The Mitec Inc. is planning to purchase a new production machine. The startup cost of purchasing and installing
Deduce the existence of the neutrino : Explain how Pauli was able to deduce the existence of the neutrino without it having been observed experimentally.
What is the difference between cash and cash equivalent : What is the difference between cash, cash equivalent, crypto-assets, digital currencies and crypto currencies? What Approaches to account cryptocurrencies?
Why does damping in vibrations occur : (a) Why does damping in vibrations occur? (b) In what physical systems is damping desirable?
What is the required rate of return for com-usa stock : What is the required rate of return for COM-USA stock? What should be the value of a USD bond? What is the bond's yield to maturity?

Reviews

Write a Review

Financial Accounting Questions & Answers

  What is the financial break-even quantity

What is the financial break-even quantity? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

  Gross profit margin for each year

Johnson & Johnson reported the following revenue and cost of goods sold information in its 10-K report for 2006, 2007, and 2008.

  Parmentier company uses the weighted

Parmentier Company uses the weighted-average method in its process costing system. The Molding Department is the second department in its production process.

  Determine how do find out which company will audit

On a company's 10k, how do you find out which company will audit them ? Why are there two opinion letters? Why are they after the dates of fiscal year end?

  Automotive installed new engine with billed price

During March, Getze Family Automotive installed a new engine with a billed price of $3,500. The company did not bill for the engine until April 1. Ignore the cost of the engine installed. What adjusting entry would Getze Family Automotive make on Mar..

  Formal bankruptcy instead of private restructuring

Revco Drug Store filed for bankruptcy in July of 1988 and was one of the largest bankruptcies in US financial history as well as being one of the largest leveraged buyouts. Using the basic background information already provided conduct more extensiv..

  Describe why budgeting is important for a firm

Describe why budgeting is important for a firm. Do you think that a firm's budget should ever be violated (exceeded)? Explain your rationale.

  Compute the direct labor rate and efficiency variances

Top Notch Music Inc. produces car stereos. During the year Top Notch Music produced 7,000 stereos. Compute the direct material price and usage variances. Electronic kits purchased and used were 7,100 kits at an actual price of $175 per kit. Compute t..

  Prepare an accrual-based Income Statement

In good format, and making whatever assumption you feel appropriate, prepare an accrual-based Income Statement

  Compute pension expense for duesbury

Average time to vesting of 4 years. Current service cost for 2015 is $23,000, and net interest expense is $8,000. Compute pension expense for Duesbury in 2015.

  What is the synergy from the merger

What is the synergy from the merger?what conversion ratio would make the firm indifferent between the two alternatives? Which alternative should Raleigh use?

  Project for development of a computer game software

1. List your proposed interventions in this situation, including the assumptions underlying each proposal. 2. Would you alter your proposals if the project was an internal project for development of a computer game software package scheduled ..

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