What is the payback period

Assignment Help Business Management

Reference no: EM131021237

Pappy's Potato has come up with a new product, the Potato Pet (they are freeze-dried to last longer). Pappy's paid $126,000 for a marketing survey to determine the viability of the product. It is felt that Potato Pet will generate sales of $581,000 per year. The fixed costs associated with this will be $185,000 per year, and variable costs will amount to 21 percent of sales. The equipment necessary for production of the Potato Pet will cost $632,000 and will be depreciated in a straight-line manner for the four years of the product life (as with all fads, it is felt the sales will end quickly). This is the only initial cost for the production. Pappy's is in a 30 percent tax bracket and has a required return of 15 percent. What is the payback period? NPV? And IRR?

Reference no: EM131021237

Questions Cloud

The most important income distribution decisions t : The Lorenz curve is a relative measure of income. This becomes obvious when one compares Lorenz curves between nations. The after-transfer income distribution is the Lorenz curve closest to the diagonal line. Since transfers favor the poor, they cau..

How you will approach those situations : It is important to practically apply your beliefs and values to the situations that you are in every day. Some of those situations will not be friendly to your beliefs and world view, and you need to think about how you will approach those situati..

Why rational for healthy people not to buy health insurance : The healthy people who decide not to buy insurance out of rational self-interest, and who turn out to be right. By not buying insurance, those (largely young) healthy people will be failing to subsidize the people insurance is meant for: the ones ..

Find the change in autonomous expenditures : How do you find the change in autonomous expenditures generated by the decline in the price level?

What is the payback period : This is the only initial cost for the production. Pappy's is in a 30 percent tax bracket and has a required return of 15 percent. What is the payback period? NPV? And IRR?

In the final round of a tv game show : In the final round of a TV game show, contestants have a chance to increase their current winnings of $1 million to $2 million. If they are wrong, their prize is decreased to $500,000. A contestant thinks his guess will be right 50% of the time. Shou..

Find equation of line that represent the number of book sale : Write a sentence that explains the meaning of the slope within the context of this problem. Find the equation of the line that represents the number of book sales. Show all work to receive full credit.

Global environment of business during the next five years : What are the implications for these developments for firms' organizational structures, management systems, and leadership styles?

What is the lemons problem : Michael Kinsley, a political columnist, observes: "The idea of insurance is to share the risks of bad outcomes." In what sense does insurance involve sharing risks? How does the problem of adverse selection affect the ability of insurance to provi..

User Account

All Pages