Generate incremental revenues

Assignment Help Finance Basics
Reference no: EM132555237

Healthy Food Inc. is considering switching its manually operated machine with a new automated machine. Although the existing unit has 5 more years of service life, its operating costs are fairly high compared to its revenue. The new automated machine costs RM2.5 million. An additional RM100,000 is needed for transportation and installation. The new machine is expected to generate incremental revenues of RM2 million with an incremental overhead cost of RM700,000 per year. It will be depreciated over 5 years to a salvage value of RM200,000.

(a) If the firm's cost of capital is 12%, calculate the following:

(i) Payback period

(ii) Net Present value

Reference no: EM132555237

Questions Cloud

Name the method used to account for a subsidiary : Name the method used to account for a subsidiary. What is the shareholding (%) a parent company must have for the entities Investment
Profit from the pricing inconsistency : Assuming you do not have any initial investment funds, suggest a way you might profit from the pricing inconsistency presented above.
Calculate the asset fair value less cost of disposal : Calculate the asset's value in use at the 31 March 2020 financial year end, and state briefly as to why each of the items included in Fly4000
How much must she deposit in an account today : How much must she deposit in an account today if interest is 12% compounded annually?
Generate incremental revenues : Healthy Food Inc. is considering switching its manually operated machine with a new automated machine.
Discuss classification and treatment of each cost incurred : Discuss the classification and treatment of each cost incurred, as per the below categories, during the reporting period ended 28 February 2020
Calculate the simple payback period : Ferrari, is considering purchasing a new grinding machine with a useful life of 10 years. The initial outlay for the machine
Apply the multi-weighted scoring model : Apply the multi-weighted scoring model to help the company in selecting one project among the four proposed ones - Reflect the strategic goal of Bio-World
Regulatory capital perspective : How are interest rate risks in the banking book treated from a regulatory capital perspective and how is a banks respective

Reviews

Write a Review

Finance Basics Questions & Answers

  What futures position should marcus take to hedge

i) What futures position should Marcus take to hedge this exposure?

  How to standardize paper and electronic medical forms

Why is it important for national health information management organizations to agree on how to standardize paper and electronic medical forms?

  Creating an action plan-identifying and setting up support

Many new college students face obstacles throughout their academic careers. Being a successful student requires you to learn or continue to develop many skills, including time management, studying, and an understanding of learning styles and colle..

  What is the sharpe ratio for the optimal portfolio

Calculate expected excess returns, alpha values, and residual variances for these stocks. What is the Sharpe ratio for the optimal portfolio

  Required rate of return

What stock price is expected 1 year from now? Round your answer to two decimal places. $ What is the required rate of return? Round your answers to two decimal places. %

  Investors required rate of return for particular security

An issue of common stock currently sells for $50.00 per share, has an expected dividend to be paid at the end of the year of $2.50 per share.

  Where would you buy a treasury bill today

Did you know that a five year T-bills are paying a coupon of about .33% today? Would you invest in bonds?

  Formula and financial calculator methods

Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods.

  Define an income statement and balance sheet

Define an "Income Statement" and "Balance Sheet". Provide an example of how each is used to manage an organization.

  What is the effective rate of interest on the bank loan

The Reynolds Corporation buys from its suppliers on terms of 2/19, net 50. Reynolds has not been utilizing the discounts offered and has been taking 50 days.

  Calculating sustainable growth rate

You've collected the following information about Odyssey, Inc.:

  How would you go about staffing the integration effort

How would you go about staffing the Integration Effort? What methods have you seen used in the past? Were they successful or not?

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