A company is considering of a new product line that is believed to be marketable for...

A company is considering of a new product line that is believed to be marketable for the next 10 years. An initial investment of $215,000 will be required with an estimated salvage value of $40,000 at the end of 10 years. The annual receipts will start at $53,000, the first year and then increase by $2000 each year thereafter. Disbursements will start at $21,000 the first year and increase by $500 each year thereafter. What is the prospective rate of return of this proposal?

Solutions

Expert Solution

the prospective rate of return of this proposal=12.90% using excel function of IRR(values)

jeff jeffy answered 1 year ago

Next > < Previous

Related Solutions

A Company is considering a new product line to supplement its range line. It is anticipated...

A Company is considering a new product line to supplement its range line. It is anticipated that the new product line will involve cash investment of $700,000 at time 0 and $1.0 million in year 1. After-tax cash inflows of $500,000 are expected in year 2, $300,000 in year 3, $700,000 in year 4, and $400,000 each year thereafter through year 10. Though the product line might be viable after year 10, the company prefers to be conservative and end...

A company is considering an investment of $600,000 in a new product line. The investment will...

A company is considering an investment of $600,000 in a new product line. The investment will be made only if it will result in a rate of return of 20% per year or higher. If the net cash flow is expected to be between $150,000 and $250,000 per year for 6 years. Use present worth analysis to determine if the decision to invest is sensitive to the projected range of revenue. Show how you arrived at your decision

Briarcliff Stove Company is considering a new product line to supplement its range line. It is...

Briarcliff Stove Company is considering a new product line to supplement its range line. It is anticipated that the new product line will involve cash investment of $700,000 at time 0 and $1.0 million in year 1. After tax cash inflows of $250,000 are expected in year 2, $300,000 in year 3, $350,000 in year 4, and $400,000 each year thereafter through year 6. Though the product line might be viable after year 6, the company prefers to be conservative...

Zachary Company is considering the addition of a new product to its cosmetics line. The company...

Zachary Company is considering the addition of a new product to its cosmetics line. The company has three distinctly different options: a skin cream, a bath oil, or a hair coloring gel. Relevant information and budgeted annual income statements for each of the products follow. Relevant Information Skin Cream Bath Oil Color Gel Budgeted sales in units (a) 140,000 220,000 100,000 Expected sales price (b) $ 7 $ 7 $ 15 Variable costs per unit (c) $ 2 $ 4...

Walton Company is considering the addition of a new product to its cosmetics line. The company...

Walton Company is considering the addition of a new product to its cosmetics line. The company has three distinctly different options: a skin cream, a bath oil, or a hair coloring gel. Relevant information and budgeted annual income statements for each of the products follow. Relevant Information Skin Cream Bath Oil Color Gel Budgeted sales in units (a) 138,000 218,000 98,000 Expected sales price (b) $ 10 $ 9 $ 16 Variable costs per unit (c) $ 2 $ 4...

Zachary Company is considering the addition of a new product to its cosmetics line. The company...

Vernon Company is considering the addition of a new product to its cosmetics line. The company...

Vernon Company is considering the addition of a new product to its cosmetics line. The company has three distinctly different options: a skin cream, a bath oil, or a hair coloring gel. Relevant information and budgeted annual income statements for each of the products follow. Relevant Information Skin Cream Bath Oil Color Gel Budgeted sales in units (a) 136,000 216,000 96,000 Expected sales price (b) $ 9 $ 7 $ 15 Variable costs per unit (c) $ 2 $ 4...

Solomon Company is considering the addition of a new product to its cosmetics line. The company...

Solomon Company is considering the addition of a new product to its cosmetics line. The company has three distinctly different options: a skin cream, a bath oil, or a hair coloring gel. Relevant information and budgeted annual income statements for each of the products follow. Relevant Information Skin Cream Bath Oil Color Gel Budgeted sales in units (a) 130,000 210,000 90,000 Expected sales price (b) $ 10 $ 9 $ 15 Variable costs per unit (c) $ 2 $ 4...

Baird Company is considering the addition of a new product to its cosmetics line. The company...

Baird Company is considering the addition of a new product to its cosmetics line. The company has three distinctly different options: a skin cream, a bath oil, or a hair coloring gel. Relevant information and budgeted annual income statements for each of the products follow. Relevant Information Skin Cream Bath Oil Color Gel Budgeted sales in units (a) 104,000 184,000 64,000 Expected sales price (b) $ 9 $ 4 $ 11 Variable costs per unit (c) $ 2 $ 1...

Rooney Company is considering the addition of a new product to its cosmetics line. The company...

Rooney Company is considering the addition of a new product to its cosmetics line. The company has three distinctly different options: a skin cream, a bath oil, or a hair coloring gel. Relevant information and budgeted annual income statements for each of the products follow. Relevant Information Skin Cream Bath Oil Color Gel Budgeted sales in units (a) 128,000 208,000 88,000 Expected sales price (b) $ 9 $ 7 $ 14 Variable costs per unit (c) $ 2 $ 4...

Subjects