Find what is the initial investment in the product

Assignment Help Financial Accounting
Reference no: EM133012294

Revenues generated by a new fad product are forecast as follows:

Year 1 revenues: $56,000

Year 2 revenues $40,000

Year 3 revenues $30,000

Year 4 revenues $20,000

Thereafter - $0

Expenses are expected to be 50% of revenues, and working capital required in each year is expected to be 20% of revenues in the following year. The product requires an immediate investment of $60,000 in plant and equipment.

Required:

Problem a. What is the initial investment in the product? Remember working capital.

Problem b. If the plant and equipment are depreciated over 4 years to a salvage value of zero using straight-line depreciation, and the firm's tax rate is 40%, what are the project cash flows in each year? Assume the plant and equipment are worthless at the end of 4 years.

Problem c. If the opportunity cost of capital is 12%, what is the project's NPV?

Problem d. What is project IRR?

Reference no: EM133012294

Questions Cloud

What is the book value of kimbo total assets today : Kimbo Widgets Inc. purchased new cloaking machinery three years ago for $6 million. What is the book value of Kimbo's total assets today?
What the difference between average and marginal tax rates : What the difference between average and marginal tax rates is that? Average tax rate is applied to personal income, whereas marginal tax rate is applied.
Calculate the paydate prior : Calculate the Paydate Prior. Bob Higgins works for Red Apple Engines, which pays employees on a semimonthly basis. Bob's annual salary is $151,800.
Develop a srs document that describes your proposed system : Develop a SRS Document that describes your proposed system and defines the inputs, outputs, functions, and attributes of the system, as well as the attributes
Find what is the initial investment in the product : Expenses are expected to be 50% of revenues, and working capital required in each year is expected. What is the initial investment in the product?
Identify a problem you want to solve : Identify a problem you want to solve (e.g, it takes too long to order food in a restaurant, patient records are still entered manually for some GP clinics
Did auditors provide an opinion on management documentation : Did Apple satisfy the two requirements for documenting and assessing internal controls to meet SOX requirements? Explain your findings.
What cost flow assumption method does kroger use for food : What cost flow assumption method does Kroger use for food? Does this match the actual flow of goods through the stores? What is the explanation for this?
What features included with a bond prospectus : What are some of the features that could be included with a bond prospectus that may have an impact on the yield of a new bond issue?

Reviews

Write a Review

Financial Accounting Questions & Answers

  Compute life corporation operating expense for the month

Cash paid by LIFE corporation for operating expenses Compute LIFE corporation operating expense for month of October year 10, under accrual basis of accounting.

  Determine the balances and reconcile with the balances

Journalize the above transactions. Open the customer's and supplier's cards - Post to T accounts the accounts receivable and accounts payable entries.

  Describe recent major disruptors to traditional consumer

Describe some recent major disruptors to traditional consumer banking services. (Describe current industry product and service trends).

  What the amount of net income shown on xyz

What the amount of net income shown on XYZ's 12/31 income statement is? Ending Retained Earnings $34,000. Land $28,000.

  Continuing clients business for planning an audit

Which of the following provides the best method of obtaining an understanding of a continuing client's business for planning an audit?

  Explain how the may not be the goal of the other participant

Explain how this may not be the goal of the other participants that enter into contracts with the firm and how shareholders can reduce this problem.

  How much is the remaining proper-plant and equipment worth

The remaining property, plant,and equipment is worth 10% more that its depreciated cost. How much is the remaining proper, plant, and equipment worth?

  Example of a cash flow from an investing activity

Which of the following is an example of a cash flow from an investing activity?

  Naturalist association is going to court to proclaim

The federal government, which owns a segment of the land at Moonstone, is fed up with this activity and has started to arrest your members when they appear naked at Moonstone. The Naturalist Association is going to court to proclaim a violation of..

  Explain the implications for the financial statements

Pharma is a group of companies listed,Explain the implications of information for the financial statements for the year ending 30 September 20X7.

  Calculate the total cost of the laser printer

Calculate the total cost of the laser printer. Ekman management asks you whether the straight-line or double- declining balance method of depreciation

  State choice of accounting policy regarding the measurement

State choice of accounting policy regarding the measurement of intangible assets at the time of recognition and after the initial acquisition.

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