Question
In: Finance
Read Book Company is the manufacturer of of exercise machines and is considering producing a new...
Read Book Company is the manufacturer of of exercise machines and is considering producing a new line of equipment in an effort to increase its market share. The new production line will cost $850,000 for manufacturing the parts and an additional $280,000is needed for installation. The equipment falls into the MACRS 3-yr class, and would be sold after four years for $350,000. The equipment line will generate additional annual revenues of $600,000, and will have additional annual operating expenses of $300,000. An inventory investment of $75,000 is required during the life of the project. Read Book Company is in the 25 percent tax bracket, and its existing cost of capital is 8 percent
. a. Calculate the initial outlay of the project
b. Calculate the annual after-tax operating cash flow for Years 1-4.
c. Determine the terminal year non-operating cash flow in year 4.
d. What is the equipment NPV?
e. What the estimated Internal Rate of Return (IRR) of the equipment
. f. Should the equipment be accepted based on the IRR criterion?
Solutions
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jeff jeffy answered 2 years agoRelated Solutions
Read Book Company is the manufacturer of of exercise machines and is considering producing a new...
Read Book Company is the manufacturer of of exercise machines
and is considering producing a new line of equipment in an effort
to increase its market share. The new production line will cost
$850,000 for manufacturing the parts and an additional $280,000is
needed for installation. The equipment falls into the MACRS 3-yr
class, and would be sold after four years for $350,000. The
equipment line will generate additional annual revenues of
$600,000, and will have additional annual operating expenses of...
Read Book Company is the manufacturer of exercise machines and is considering producing a new line...
Read Book Company is the manufacturer
of exercise machines and is considering producing a new line of
equipment in an effort to increase its market
share. The new production line will cost $850,000
for manufacturing the parts and an additional $280,000 is needed
for installation. The equipment falls into the MACRS 3‐yr class,
and would be sold after four years for $350,000. The equipment line
will generate additional annual revenues of $600,000, and will
have
additional annual operating expenses
of...
Read Book Company is the manufacturer of exercise machines and is considering producing a new line...
Read Book Company is the manufacturer of exercise machines and
is considering producing a new line of equipment in an effort to
increase its market share. The new production line will cost
$850,000 for manufacturing the parts and an additional $280,000 is
needed for installation.
The equipment falls into the MACRS 3‐yr class, and would be sold
after four years for $350,000. The equipment line will generate
additional annual revenues of $600,000, and will have Additional
annual operating expenses of...
Read Book Company is the manufacturer of exercise machines and is considering producing a new line...
Read Book Company is the manufacturer of exercise machines and
is considering producing a new line of equipment in an effort to
increase its market share. The new production
line will cost $850,000 for manufacturing the parts and an
additional $280,000 is needed for installation. The equipment falls
into the MACRS 3‐yr class, and would be sold after four years for
$350,000. The equipment line will generate additional annual
revenues of $600,000, and will have additional annual operating
expenses of...
• A MAJOR POTENTIOMETER MANUFACTURER IS CONSIDERING TWO ALTERNATIVES FOR NEW PRODUCTION MACHINES WITH CAPACITY TO...
• A MAJOR POTENTIOMETER MANUFACTURER IS CONSIDERING TWO
ALTERNATIVES FOR NEW PRODUCTION MACHINES WITH CAPACITY TO PRODUCE
20 000 UNITS PER DAY. ONE ALTERNATIVE IS FOR A HIGH-CAPACITY
AUTOMATED PRODUCTION MACHINE CAPABLE OF PRODUCING 20 000 UNITS PER
DAY WHEN OPERATED FOR THREE SHIFTS PER DAY. A QUARTER-TIME EMPLOYEE
WOULD BE ASSIGNED TO MONITOR THE MACHINE (EMPLOYEE WOULD MONITOR
OTHER MACHINES AT THE SAME TIME). WITH THE THREE-SHIFT SCHEDULE
THIS WOULD BE EQUIVALENT TO A THREE-QUARTER-TIME EMPLOYEE.
• A SECOND...
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ABC company is considering producing a new range of smartphones
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ABC company is considering producing a new range of smartphones
that will require it to build a new factory. Feasibility studies
have been done on the factory which cost $5 million. The studies
have found the following:
1. The factory will cost $25 million and will have a useful life
of 20 years.
2. The land where the factory will go is currently used as a
carpark for workers and it is assumed that the company will have to
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ABC company is considering producing a new range of smartphones that will require it to build...
ABC company is considering producing a new range of smartphones
that will require it to build a
new factory. Feasibility studies have been done on the factory
which cost $5 million. The studies
have found the following:
The factory will cost $25 million and will have a useful life of
20 years.
The land where the factory will go is currently used as a
carpark for workers and it is assumed that the company will have to
pay $200000 per...
BAD company is considering producing a new range of smartphones that will require it to build...
BAD company is considering producing a new range of smartphones
that will require it to build a
new factory. Feasibility studies have been done on the factory
which cost $5 million. The studies
have found the following:
The factory will cost $25 million and will have a useful life of
20 years.
The land where the factory will go is currently used as a
carpark for workers and it is assumed that the company will have to
pay $200000 per...
ABC company is considering producing a new range of smartphones that will require it to build...
ABC company is considering producing a new range of smartphones
that will require it to build a new factory. The project itself
will go for 20 years. Feasibility studies have been done on the
factory which cost $5 million. The studies have found the
following:
The factory will cost $25 million and will have a useful life of
25 years.
The land where the factory will go is currently used as a
carpark for workers and it is assumed that...
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