Solve the net present value of the investment

Assignment Help Financial Accounting
Reference no: EM132713042

K&G Company currently sells 1.15 million units per year of a product to one customer at a price of $3.30 per unit. The customer requires that the product be exclusive and expects no increase in sales during the five-year contract. The company manufactures the product with a machine that it purchased seven years ago at a cost of $737,000. Currently, the machine has a book value of $434,000 but the market value is only $244,000. The machine is expected to last another five years, after which it will have no salvage value.

Last year, the production variable costs per unit were as follows:

Direct materials                       $2.20
Direct labour                            0.60
Variable overhead                        0.20
Total variable cost per unit              $3.00

The company president is considering replacing the old machine with a new one that would cost $812,000. The new machine is expected to last five years. At the end of that period, the salvage value will be $347,500. The president expects to save 4% of the company's total variable costs with the new machine.

Problem 1: Assume that the company's desired rate of return is 11%. Calculate the net present value of the investment.

Reference no: EM132713042

Questions Cloud

Record the transactions in crane company books : Record the transactions in Crane Company's books. Crane Company commenced operations on July 1. Crane Company uses a periodic inventory system.
Calculate the centripetal force exerted : Calculate the centripetal force exerted on a 850.0 kg car that negotiates a 400.0 m radius curve at 30.00 m/s.
Describe the importance of indicators in public health : Describe the importance of indicators in public health, and the related stakeholders.
Find the normal force acting on the person : What is the normal force acting on the person as he travels upwards?
Solve the net present value of the investment : K&G Company currently sells 1.15 million units, Assume that the company's desired rate of return is 11%. Calculate the net present value of the investment.
Draw two wave diagrams for two sounds : Draw two wave diagrams for two sounds that have the same volume but different pitch.
Determine the total amount of period costs : Depreciation on delivery Advertising 1,600 equipment 11,200 Delivery equipment repairs 300. Determine the total amount of period costs
The etiology of pathologic condition : The signs and symptoms of the pathologic condition. The etiology of pathologic condition
What is the normal force acting on the person : What is the normal force acting on the person as he accelerates downwards?

Reviews

Write a Review

Financial Accounting Questions & Answers

  Record the sale of net assets on the books of crow company

Record the acquisition of the net assets of Crow Company on Bart Company's books. Record the sale of the net assets on the books of Crow Company.

  Qality of financial reporting in uae or other gcc countries

Has the adoption of IFRS improved the quality of financial reporting in UAE or other GCC countries? Bring true evidences.

  Paper that discusses accounting for partnerships

Prepare a written paper that discusses Accounting for Partnerships. Your paper may cover any subject area relating to Accounting for Partnerships.

  What is the economical order frequency

Consider an inventory item that has carrying cost, What is the EAR for credit terms of 2/10 net 45? What is the economical order frequency? What is proof!

  What percentage will the price of the two bonds change

f the interest rate suddenly rises by 2% and If the interest rate suddenly drops by 2, by what percentage will the price of the two bonds change?

  Deferred tax asset and deferred tax liability accounts

Pine, Inc. earns book net income before tax of $400,000 in 2013. Pine acquires a depreciable asset in 2013 and first year tax depreciation exceeds book depreciation by $60,000. Pine has no other temporary or permanent differences. Assuming the U.S. t..

  Calculate ratio of contribution margin to operating income

What observations can you draw by examining the break-even point of each firm given that they earned an equal amount of operating income on identical sales volumes in 2010?

  Competitive and price-sensitive

Ultratech, Inc., manufactures several different types of printed circuit boards; however, two of the boards account for the majority of the company's sales. The first of these boards, a television circuit board, has been a standard in the industry fo..

  Prepare all necessary journal entries for roley

Roley paid freight costs of $1,200. On July 3, Roley returned damaged goods and received credit of $6,000. On July 10, Roley paid for the goods. Prepare all necessary journal entries for Roley.

  What are the balances in the accounts in the 2014

What are the balances in the accounts in the 2014 consolidated financial statements - Make the entry OBAMA makes when it sells the truck to BIDEN

  Determine the net present value of alternative

Interstate Manufacturing is considering either replacing one of its old machines with a new machine or having the old machine overhauled. Information about the two alternatives follows. Management requires a 10% rate of return on its investments. Sel..

  Journalize the entries for the purchase of stock

On March 4, Breen Corporation acquired 7,800 shares of the 200,000 outstanding shares of Melton Co. common stock at $41 plus commission charges of $200. On June 15, a cash dividend of $2.20 per share was received. Using the cost method, journalize th..

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