Question
In: Finance
a. Pappy’s Potato has come up with a new product, the Potato Pet (they are freeze-dried...
a. Pappy’s Potato has come up with a new product, the Potato Pet (they are freeze-dried to last longer). Pappy’s paid $120,000 for a marketing survey to determine the viability of the product. It is felt that Potato Pet will generate sales of $815,000 per year. The fixed costs associated with this will be $196,000 per year, and variable costs will amount to 20 percent of sales. The equipment necessary for production of the Potato Pet will cost $865,000 and will be depreciated in a straight-line manner for the 4 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 has a tax rate of 40 percent and a required return of 13 percent.
Calculate the payback period, NPV, and IRR.
Solutions
jeff jeffy answered 2 years agoRelated Solutions
a. Pappy’s Potato has come up with a new product, the Potato Pet (they are freeze-dried...
a. Pappy’s Potato has come up with a new product, the Potato Pet
(they are freeze-dried to last longer). Pappy’s paid $120,000 for a
marketing survey to determine the viability of the product. It is
felt that Potato Pet will generate sales of $815,000 per year. The
fixed costs associated with this will be $196,000 per year, and
variable costs will amount to 20 percent of sales. The equipment
necessary for production of the Potato Pet will cost $865,000 and...
a. Pappy’s Potato has come up with a new product, the Potato Pet (they are freeze-dried...
a. Pappy’s Potato has come up with a new product, the Potato Pet
(they are freeze-dried to last longer). Pappy’s paid $120,000 for a
marketing survey to determine the viability of the product. It is
felt that Potato Pet will generate sales of $815,000 per year. The
fixed costs associated with this will be $196,000 per year, and
variable costs will amount to 20 percent of sales. The equipment
necessary for production of the Potato Pet will cost $865,000 and...
Pappy’s Potato has come up with a new product, the Potato Pet (they are freeze-dried to...
Pappy’s Potato has come up with a new product, the Potato Pet
(they are freeze-dried to last longer). Pappy’s paid $138,000 for a
marketing survey to determine the viability of the product. It is
felt that Potato Pet will generate sales of $593,000 per year. The
fixed costs associated with this will be $197,000 per year, and
variable costs will amount to 19 percent of sales. The equipment
necessary for production of the Potato Pet will cost $656,000 and
will...
Pappy’s Potato has come up with a new product, the Potato Pet (they are freeze-dried to...
Pappy’s Potato has come up with a new product, the Potato Pet
(they are freeze-dried to last longer). Pappy’s paid $195,000 for a
marketing survey to determine the viability of the product. It is
felt that Potato Pet will generate sales of $910,000 per year. The
fixed costs associated with this will be $234,000 per year, and
variable costs will amount to 22 percent of sales. The equipment
necessary for production of the Potato Pet will cost $1,000,000 and
will...
ABC Potato has come up with a new product, the Pet Potato (they are freeze-dried to...
ABC Potato has come up with a new product, the Pet Potato (they
are freeze-dried to last longer). ABC Potato paid $120,000 for a
marketing survey to determine the viability of the product. It is
felt that Pet Potato will generate sales of $270,000 per year. The
fixed costs associated with this will be $115,000 per year, and
variable costs will amount to 30% of sales. The equipment necessary
for production of the Pet Potato will cost $200,000 and will...
Pappy’s Potato has come up with a new product, the Potato Premium Snack. Pappy’s paid $6,000...
Pappy’s Potato has come up with a new product, the Potato
Premium Snack. Pappy’s paid $6,000 for a marketing study to
determine the viability of the product. It is planned that the
company will produce 20,000 pieces of the Potato Premium Snack in
year 1 and this will increase by 50% in year 2 and remain constant
for years 3 and 4. The introductory sale price of one Potato
Premium Snack will be $2, it is felt that the price...
Pappy's Potato has come up with a new product, the Potato Pet that they are considering...
Pappy's Potato has come up with a new product, the Potato Pet
that they are considering launching. The company has determined
they will need a fixed asset investment at the beginning of the
project of $260,000. This asset will last for four years which is
the life of the project. Also, they will need to have more net
working capital (NWC) of which they have estmated an amount of
$16,500 for this purpose. The NWC will be recovered when the...
Pappy's Potato has come up with a new product, the Potato Pet that they are considering...
Pappy's Potato has come up with a new product, the Potato Pet
that they are considering launching. The company has determined
they will need a fixed asset investment at the beginning of the
project of $260,000. This asset will last for four years which is
the life of the project. Also, they will need to have more net
working capital (NWC) of which they have estmated an amount of
$16,500 for this purpose. The NWC will be recovered when the...
Use the following information to answer the next 3 questions. Pappy’s Potato has come up with...
Use the following information to answer the next 3
questions.
Pappy’s Potato has come up with a new product, the Potato Pet
(they are freeze-dried to last longer). It is expected that Potato
Pet will generate sales of $575,000 per year. The fixed costs
associated with this will be $179,000 per year, and variable costs
will amount to 20 percent of sales. The equipment necessary for
production of the Potato Pet will cost $920,000 and will be
depreciated to zero...
The company has just come up with a new highly profitable product. As a result it...
The company has just come up with a new highly profitable
product. As a result it plans to retain all earnings for the next 3
years (i.e. b=1) and invest them at a return (R) of 100% per year.
After three years the company will go back to its old policy of
retaining 60 percent of its earnings and investing them at 20
percent.
What will be the new price of the stock?
The new PE ratio
The new premium...
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