Should axillar go ahead with the new conditioning shampoo

Assignment Help Financial Accounting

Reference no: EM13144561

Axillar Beauty Products Corporation is considering the production of a new conditioning shampoo which will require the purchase of new mixing machinery. The machinery will cost $375,000, is expected to have a useful life of 10 years, and is expected to have a salvage value of $50,000 at the end of 10 years. The machinery will also need a $35,000 overhaul at the end of year 6. A $40,000 increase in working capital will be needed for this investment project. The working capital will be released at the end of the 10 years. The new shampoo is expected to generate net cash inflows of $85,000 per year for each of the 10 years. Axillar's discount rate is 16%.
Required:

a. What is the net present value of this investment opportunity?

b. Based on your answer to (a) above, should Axillar go ahead with the new conditioning shampoo?

Reference no: EM13144561

Questions Cloud

Short-term and readily marketable : Assume all investments are short-term and readily marketable. The following transactions occurred.June 2; purchased 300 shares of Beaty Corporation common stock for $45 per share; July 1; purchased 200 Meng Corporation bonds for $220,000; July 30;..

What amount of energy is required to melt ice : What amount of energy is required to melt a 13.5 g piece of ice at 0oC to form liquid water at the same temperature of 0? The heat of fusion of water = 333 J/g , T he specific heat of H2O is approx. constant at 4.18 J/g x C.

Probability that applicant gets offer from both companies : Assuming that the two job offers are independent of each other, what is the probability that the applicant gets an offer from both companies?

Determining portfolio at fair value : Cost is $17,000 and Fair Value is $16,000; Security B; Cost is $22,000 and Fair Value is $26,000; Security C; Cost is $34,000 and Fair Value is $29,000.Instructions: prepare the adjusting entry for Otto Corporation on December 31, 2009 to report t..

Should axillar go ahead with the new conditioning shampoo : What is the net present value of this investment opportunity? Based on your answer to (a) above, should Axillar go ahead with the new conditioning shampoo?

Journal entries-cayuga meadows : Cayuga Meadows purchased 42,000 shares of common stock of Long Corporation as a long-term investment for $1,000,000. During the year, Long Corporation reported net income of $500,000 and paid dividends of $200,000.

Calculate p-value for population of subscribers to golf : The publisher selects a random sample of 200 subscribers and finds that 116 plan to renew their subscriptions. Use (a=0.01). p = the population of subscribers to Golf Illustrated who renew. Calculate the p-value.

Mathematical expressions and equations : Answer the following questions. Use Equation Editor to write mathematical expressions and equations. First, save this file to your hard drive by selecting Save As from the File menu. Click the white space below each question to maintain proper for..

How many molecules of ethanol are present : How many molecules of ethanol C2H5OH are present in 135 g of ethanol? The density of ethanol is 0.789 g/cm3?

User Account

All Pages