The building and equipment are estimated to cost 1100000

Reference no: EM13594646

Thurman Munster, the owner of Adams Family RVs, is considering the addition of a service center his lot. The building and equipment are estimated to cost $1,100,000 and both the building and equipment will be depreciated over 10 years using the straight-line method. The building and equipment have zero estimated residual value at the end of 10 years. Munster's required rate of return for this project is 12 percent. Net income related to each year of the investment is as follows:

Revenue $450,000
Less:
Material cost $ 60,000
Labor 100,000
Depreciation 110,000
Other 10,000 280,000
Income before taxes 170,000
Taxes at 40% 68,000
Net income $102,000

(a) Determine the net present value of the investment in the service center. Should Munster invest in the service center?
(b) Calculate the internal rate of return of the investment to the nearest ½ percent.
(c) Calculate the payback period of the investment.
(d) Calculate the accounting rate of return.

Reference no: EM13594646

Questions Cloud

Stowers research issues bonds dated january 1 2011 that pay : stowers research issues bonds dated january 1 2011 that pay interest semiannually on june 30 and december 31. the bonds

The following information relates to vice versa ventures : the following information relates to vice versa ventures for calendar year 20xx the companys first year of operations

At 900k the following reaction has kp0345 2so2 o2-gt2so3 : at 900k the following reaction has kp0.345. 2so2 o2-gt2so3. in an equilibruim mixture the partial pressure of so2 and

A long narrow steel rod of length 25000 m at 25 c is : a long narrow steel rod of length 2.5000 m at 25 c is oscillating as a pendulum about a horizontal axis through one

The building and equipment are estimated to cost 1100000 : thurman munster the owner of adams family rvs is considering the addition of a service center his lot. the building and

What happens when water is heated to extremely high : what happens when water is heated to extremely high temperatures? will it ever dissociate back into hydrogen and oxygen

A charged particle initially moving south in a vertically : sign of a charged particle in a magnetic field?a charged particle initially moving south in a vertically downward

The rate law for the decomposition of n2o5 is rate kn2o5 : the rate law for the decomposition of n2o5 is rate kn2o5. if k 1.0 x 10-5exp s-1 what is the reaction rate when the

Formulate a linear programming model that can be used to : better products inc. manufactures three products on two machines. in a typical week 40 hours are available on each

User Account

All Pages