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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 be depreciated in a straight-line manner for the four years of the product life (as with all fads, it is felt that the sales will end quickly). This is the only initial cost for production. ABC Potato is in a 40% tax bracket and has a required return of 9%.
1. Calculate the initial investment (CF0) for this project. (-$200,000)
2. Calculate the annual cash flows (ACF) for this project. ($64,400)
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jeff jeffy answered 1 year agoRelated Solutions
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(they are freeze-dried to last longer). Pappy’s paid $120,000 for a
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felt that Potato Pet will generate sales of $815,000 per year. The
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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...
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Pappy’s Potato has come up with a new product, the Potato Pet (they are freeze-dried to...
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(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
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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...
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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.
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(they are freeze-dried to last longer). It is expected that Potato
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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...
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