Question
In: Finance
Yeatman Co. is considering an investment that will have the following sales, variable costs, and fixed...
Yeatman Co. is considering an investment that will have the following sales, variable costs, and fixed operating costs:
| Year 1 | Year 2 | Year 3 | Year 4 | |
| Unit Sales | 5,500 | 5,200 | 5,700 | 5,820 |
| Sale price | $42.57 | $43.55 | $44.76 | $46.79 |
| Variable cost per unit | $22.83 | $22.97 | $23.45 | $23.87 |
| Fixed Operating costs except depreciation | $66,750 | $68,950 | $69,690 | $68,900 |
| Accelerated Depreciation Rate | 33% | 45% | 15% | 7% |
The project will require an investment of $25,000 in new equipment. The equipment will have a no salvage value at the end of the projects four year life. Yeatman pays a constant tax rate of 40% and it has a weighted average cost of capital of 11%. Determine what the project's NVP woulod be using accelerated depreciation and straight line depreciation. Please show work.
Solutions
jeff jeffy answered 1 year agoRelated Solutions
Garida Co. is considering an investment that will have the following sales, variable costs, and fixed...
Garida Co. is considering an investment that will have the
following sales, variable costs, and fixed operating costs:
Year 1
Year 2
Year 3
Year 4
Unit sales
4,800
5,100
5,000
5,120
Sales price
$22.33
$23.45
$23.85
$24.45
Variable cost per unit
$9.45
$10.85
$11.95
$12.00
Fixed operating costs
$32,500
$33,450
$34,950
$34,875
This project will require an investment of $20,000 in new
equipment. Under the new tax law, the equipment is eligible for
100% bonus deprecation at t =...
Fox Co. is considering an investment that will have the following sales, variable costs, and fixed...
Fox Co. is considering an investment that will have the
following sales, variable costs, and fixed operating costs:
Year 1
Year 2
Year 3
Year 4
Unit sales
4,200
4,100
4,300
4,400
Sales price
$29.82
$30.00
$30.31
$33.19
Variable cost per unit
$12.15
$13.45
$14.02
$14.55
Fixed operating costs
$41,000
$41,670
$41,890
$40,100
This project will require an investment of $10,000 in new
equipment. Under the new tax law, the equipment is eligible for
100% bonus deprecation at t =...
McFann Co. is considering an investment that will have the following sales, variable costs, and fixed...
McFann Co. is considering an investment that will have the
following sales, variable costs, and fixed operating costs:
Year 1
Year 2
Year 3
Year 4
Unit sales
4,800
5,100
5,000
5,120
Sales price
$22.33
$23.45
$23.85
$24.45
Variable cost per unit
$9.45
$10.85
$11.95
$12.00
Fixed operating costs except depreciation
$32,500
$33,450
$34,950
$34,875
Accelerated depreciation rate
33%
45%
15%
7%
This project will require an investment of $10,000 in new
equipment. The equipment will have no salvage value...
McFann Co. is considering an investment that will have the following sales, variable costs, and fixed...
McFann Co. is considering an investment that will have the
following sales, variable costs, and fixed operating costs:
Year 1
Year 2
Year 3
Year 4
Unit sales
5,500
5,200
5,700
5,820
Sales price
$42.57
$43.55
$44.76
$46.79
Variable cost per unit
$22.83
$22.97
$23.45
$23.87
Fixed operating costs except depreciation
$66,750
$68,950
$69,690
$68,900
Accelerated depreciation rate
33%
45%
15%
7%
This project will require an investment of $15,000 in new
equipment. The equipment will have no salvage value...
Yeatman Co. is considering an investment that will have the following sales, variable costs, and fixed...
Yeatman Co. is considering an investment that will have the
following sales, variable costs, and fixed operating costs:
Year 1
Year 2
Year 3
Year 4
Unit sales
4,800
5,100
5,000
5,120
Sales price
$22.33
$23.45
$23.85
$24.45
Variable cost per unit
$9.45
$10.85
$11.95
$12.00
Fixed operating costs
$32,500
$33,450
$34,950
$34,875
This project will require an investment of $20,000 in new
equipment. Under the new tax law, the equipment is eligible for
100% bonus deprecation at t =...
Yeatman Co. is considering an investment that will have the following sales, variable costs, and fixed...
Yeatman Co. is considering an investment that will have the
following sales, variable costs, and fixed operating costs:
Year 1
Year 2
Year 3
Year 4
Unit sales
4,800
5,100
5,000
5,120
Sales price
$22.33
$23.45
$23.85
$24.45
Variable cost per unit
$9.45
$10.85
$11.95
$12.00
Fixed operating costs
$32,500
$33,450
$34,950
$34,875
This project will require an investment of $15,000 in new
equipment. Under the new tax law, the equipment is eligible for
100% bonus deprecation at t =...
Hamood Plumbing Co. estimates that variable costs will be 70% of sales and fixed costs will...
Hamood Plumbing Co. estimates that variable costs will be 70% of
sales and fixed costs will total OMR 2,160,000. The selling price
of the product is OMR 10, and 750,000 units will be sold.
Instructions
Using the mathematical equation,
(a) Compute the break-even point in units and Omani Riyals.
(b) Compute the margin of safety in Riyals and as a ratio.
(c) Compute net income.
Problem 2
Ibri, Inc. owns a machine that produces baskets for the gift
packages the...
Variable, Fixed, and Mixed Costs Classify the following costs of activity inputs as variable, fixed, or...
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In 2013, Granny Co. has sales of P800,000, flexible (variable)
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A
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