What would be the total annual cash inflows associated

Assignment Help Financial Accounting

Reference no: EM131211519

Billy Brown, owner of Billy’s Ice Cream On-the-Go, is investigating purchasing a new delivery van that would contain a custom-built refrigeration unit. The van would cost $106,000, have an eight year useful life, and generate cost savings of $23,000 per year compared to the van currently being used. Also, Billy estimates the new van would result in the sale of 2,500 more litres of ice cream each year, which has a contribution margin of $1 per litre. (Ignore income taxes.)

Required:

1. What would be the total annual cash inflows associated with the new van for capital budgeting purposes?

2. Calculate the IRR promised by the new van. (Hint: Use Microsoft Excel to calculate the discount factor(s).) (Do not round intermediate calculations and round your final answer to one decimal place.)

3. Assume that in addition to the cash flows described above, the van will have a $14,000 salvage value at the end of eight years. Calculate the IRR. (Hint: Use Microsoft Excel to calculate the discount factor(s).) (Do not round intermediate calculations and round your final answer to one decimal place.)

Reference no: EM131211519

Questions Cloud

Evaluate your claim at significance level : Recall the definition of functionality (CTQ2) in POI case study. You have inspected 10 boxes of MSDs and couted the number of MSDs that are broken in each box as 10, 9, 5, 4, 5, 9, 6, 6, 9, 11. Based on these samples, you want to claim to your sup..

Discuss the pressure exerted by the stock market on publicly : Discuss the pressure exerted by the stock market on publicly traded companies as well as the structure of stock securities including voting rights.

Determine the pre-determined overhead rate for the year : Dane Co. applies manufacturing overhead to jobs based on machine hours used. At the beginning of the year, the company estimated that overhead costs would total $86,000 for the year, and that the machine would run for 4,000 hours during the year. Det..

Organizational culture and societal culture : What is the difference between organizational culture and societal culture?

What would be the total annual cash inflows associated : Billy Brown, owner of Billy’s Ice Cream On-the-Go, is investigating purchasing a new delivery van that would contain a custom-built refrigeration unit. What would be the total annual cash inflows associated with the new van for capital budgeting purp..

Evaluate their magnitudes and the cosine of the angle : For the following vectors in 3-space with x; y; z components as given, evaluate their magnitudes and the cosine of the angle between them (i b, j b, and k b are the orthogonal unit vectors along the x, y, and z axes, respectively)

Coaching for performance : In Sir John Whitmore text - 'Coaching for Performance', he mentioned that there are qualities that are common to all leaders. They are: Values, Vision, Authenticity, and Agility.

What are the qualities and characteristics of nursing leader : Describe why you selected this nursing leader. - What are the qualities and characteristics of the nursing leader that you admire most?

Prepare a sales budget and a schedule of cash receipts : Haas Company is a retail company that specializes in selling outdoor camping equipment. The company is considering opening a new store on October 1, 2015. The company president formed a planning committee to prepare a master budget for the first thre..

User Account

All Pages