Rnt will be 3500 per month 2 equipment will cost 270000

Reference no: EM13578762

Your client has a potential business opportunity. He has given you the following information.

1] Rent will be $3,500 per month. 2] Equipment will cost $270,000; estimated life is 15 years after which it will have a salvage value of $18,000. Depreciation will be straight line after considering the salvage value.

3] Projected sales are $300,000 per year and CGS are projected at 20% of sales.

4] Operating costs are: Salaries $70,000 per year Insurance $3,500 per year Utilities $27,000 per year Royalties 12.5% of sales

5] Ignore all income taxes. Required:

a] Prepare a contribution format income statement that shows the expected annual net operating income.

b] Compute the simple rate of return for the project. Your client requires a simple rate of return of 14%; should he do the deal?

c] Compute the payback period for the project. If your client wants a payback period of four years or less, will he do the deal?

Reference no: EM13578762

Questions Cloud

A company had revenue of 740000 rent expense of 119000 : a company had revenue of 740000 rent expense of 119000 utility expense of 11900 salary expense of 144500 depreciation

A finance company offers a 3 plan the cost of a one-year : a finance company offers a 3 plan. the cost of a one-year loan is 3 and this cost is added to the loan. this total is

On january 1 able company purchased equipment costing : on january 1 able company purchased equipment costing 202200 with an estimated salvage value of 15800 and an estimated

If each coded item in a catalog begins with 3 distinct : 1. a box contains 500 envelopes of which 75 contain 100 in cash 150 contain 25 and 275 contain 10. an envelope may be

Rnt will be 3500 per month 2 equipment will cost 270000 : your client has a potential business opportunity. he has given you the following information.1 rent will be 3500 per

At least 14 units of b and no more than 20 units of a must : ballast must weigh 150 kg. it can be made from two raw materials a with a cost of rs. 20 per unit and b with a cost of

Springfield companys master budget includes estimated costs : springfield companys master budget includes estimated costs and expenses of 350000 for its third quarter of operations.

Mercury bag company produces cases of grocery bags the : mercury bag company produces cases of grocery bags. the managers at mercury are trying to develop budgets for the

What is the probability it fails to detect an under filled : 1. an automated weight monitor can detect under filled cans of beverages with probability 0.98. what is the

User Account

All Pages