What is the NPV, IRR and Discounted PayBack of the project

Assignment Help Accounting Basics
Reference no: EM133020294

Question - The ABC Co. Ltd wants to add an additional production line. To DO IT, the company must spend $120,000 to expand its current building and purchase $1.4 million in new equipment. The building expansion has a salvage value of $96,000 and the equipment has a salvage value of $390,001. This new line is expected to produce 200,000 units with a projected sales price of $4.65 per unit and a variable cost of $2.90 a unit. The company has spent $10,000 R&D fees on the new production line. Gross profit from existing products is expected to decline by $29,000 a year as a result of this addition. Fixed costs are $42,000 annually. The net working capital requirement is90% of the fixed costs and will be fully recovered at the ending year of the project. The company uses straight-line depreciation over the life of the product and requires a 15% rate of return. Taxes are incurred at a rate of 34%. The life of the project is five years. What is the NPV, IRR and Discounted PayBack of the project? Show the breakdown of the cash flows and all the steps?

Reference no: EM133020294

Questions Cloud

How much will he have saved to buy the guitar : If he leaves the accumulated money in the savings account for another four years at 7.06% compounded quarterly, how much will he have saved to buy the guitar
What amount of cash did franco received from the bank : Franco, Inc. received from a customer a one-year, P1,000,000 note bearing annual interest of 8%. What amount of cash did Franco received from the bank
What would you pay for the share now : The share price is expected to be $250 at that time. If you require a 13% rate of return, what would you pay for the share now
What would you pay for a share of this stock : Bronze plc currently pays a £2 per share dividend. What would you pay for a share of this stock if you demand a 20 percent rate of return
What is the NPV, IRR and Discounted PayBack of the project : The life of the project is five years. What is the NPV, IRR and Discounted PayBack of the project? Show the breakdown of the cash flows and all the steps
What would be any adjustment you would make : What would be any adjustment you would make to the NCI taking into consideration the elimination of this intercompany transaction in 2020
What is the net carrying value of the patent : Rizzo Inc. purchased a patent for $465,000 on June 30, 2020. It has a useful life of 20 years. What is the net carrying value of the patent on December 31, 2022
Compute over or under absorption of overhead : Actual machine hours worked = 86700; Actual production overhead = Rs. 9,80,000. Compute over or under absorption of overhead
Calculate the cumulative average abnormal return : The expected return on CDE Ltd.'s share was -0.5 per cent on that next day. Calculate the cumulative average abnormal return

Reviews

Write a Review

Accounting Basics Questions & Answers

  Example of the kinds of decisions

Explain what each of the different responsibility centers is and what each is accountable for and why each center has its own budget. Give an example of the kinds of decisions where incremental analysis would be used in each center.

  Problem 1 your firm is contemplating the purchase of a new

problem 1 your firm is contemplating the purchase of a new 720000 computer-based order entry system. the system will be

  Calculate the amount of net income reported on mt glass

Calculate the amount of net income reported on M.T. Glass, Inc.'s income statement for June using the FIFO method.

  What tools are available to help shoppers compare prices

What tools are available to help shoppers compare prices, features, and values and check other shoppers opinions?

  Prepare general journal entries to record the transactions

Prepare general journal entries to record the above transactions and the depreciation journal entries required at the end of each reporting period up to 30 June

  If there is a 20 chance we will get a 16 return a 30

if there is a 20 chance we will get a 16 return a 30 chance of getting a 14 return a 40 chance of getting a 12 return

  Compute the basic and diluted earning per share

Bragg issued $1,500,000 of 10% convertible bonds at face value during 2012. REQUIRED - Compute the basic and diluted earning per share for 2013

  How much is the initial carrying value of the bond

On January 1, 2020, Marimar Company issued 10,000 of its 12%, P1,000 face value 5-year bonds at 105. How much is the initial carrying value of the bond

  What total amount should be reported as cash on december

Money market placement ( third bank) 1,000,000. What total amount should be reported as cash and cash equivalents on December 31,2020?

  What is the total cost of the ending inventory

The firm uses the perpetual inventory system, and there are 23 units of the item on hand at the end of the year. What is the total cost of the ending inventory

  What is total cost of the work in process-cutting department

what is the total cost of the Work in Process-Cutting Department inventory at the end of the period

  Accounts payable accounts receivable cash inventory and

selected account balances for hulse company at january 1 2014 are presented below.accounts payable14000accounts

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