Question
In: Accounting
Topperton Company has developed a new industrial product. An outlay of $8 million is required for...
Topperton Company has developed a new industrial product. An outlay of $8 million is required for equipment to produce the new product, and additional net working capital of $400,000 is required to support production and marketing. In addition, a one-time $400,000 (before-tax) expense will be incurred the year that the equipment is placed into service. The equipment will be depreciated on a straight-line basis to a zero book value over 6 years. Although the depreciable life is 6 years, the project is expected to have a productive life of 8 years, and it is estimated that the equipment can be sold for $1 million at that time. Revenues minus expenses are expected to be $3 million per year. The cost of capital for this project is 14%, and the relevant tax rate is 30%. What is the NPV of the new product?
Group of answer choices
$2,956,923
$3,326,891
$3,002,696
None of these
Solutions
Expert Solution
C. $3,002,696
Explanation:
Be careful with commas while reading the figures
ekkarill92 answered 1 year agoRelated Solutions
Topperton Company has developed a new industrial product. An outlay of $8 million is required for...
Topperton Company has developed a new industrial product. An
outlay of $8 million is required for equipment to produce the new
product, and additional net working capital of $400,000 is required
to support production and marketing. In addition, a one-time
$400,000 (before-tax) expense will be incurred the year that the
equipment is placed into service. The equipment will be depreciated
on a straight-line basis to a zero book value over 6 years.
Although the depreciable life is 6 years, the...
The Miller Corporation is considering a new product. An outlay of $255 million is required for...
The Miller Corporation is considering a new product. An outlay
of $255 million is required for equipment to produce the new
product and additional net working capital of $31 million is
required to support production. The equipment will be depreciated
on a straight-line basis to a zero book value over 10 years.
Although the depreciable life is 10 years, the project is expected
to have a productive life of only 8 years, and it is expected to
have a zero...
Your firm is considering a new product development. An outlay of $110,000 is required for equipment,...
Your firm is considering a new product development. An outlay of
$110,000 is required for equipment, and additional net working
capital of $5,000 is required. Implementing the project will
generte a time zero investment tax credit benefit of $3,000 for the
firm (i.e. at the beginning of the project). The project is
expected to have a 4 year life, and the equipment will be
depreciated on a straight line basis to a $10,000 book value.
Producing the new product will...
Valmont Company has developed a new industrial piece of equipment called the XP-200. The company is...
Valmont Company has developed a new industrial piece of
equipment called the XP-200. The company is considering two methods
of establishing a selling price for the XP-200—absorption cost-plus
pricing and value-based pricing.
Valmont’s cost accounting system reports an absorption unit
product cost for XP-200 of $8,600. Its markup percentage on
absorption cost is 85%. The company’s marketing managers have
expressed concerns about the use of absorption cost-plus pricing
because it seems to overlook the fact that the XP-200 offers
superior...
Valmont Company has developed a new industrial piece of equipment called the XP-200. The company is...
Valmont Company has developed a new industrial piece of
equipment called the XP-200. The company is considering two methods
of establishing a selling price for the XP-200—absorption cost-plus
pricing and value-based pricing.
Valmont’s cost accounting system reports an absorption unit
product cost for XP-200 of $9,200. Its markup percentage on
absorption cost is 85%. The company’s marketing managers have
expressed concerns about the use of absorption cost-plus pricing
because it seems to overlook the fact that the XP-200 offers
superior...
Eytchison Industrial Products Inc. has developed a new industrial grinder, model OK-23, that is designed to...
Eytchison Industrial Products Inc. has developed a new
industrial grinder, model OK-23, that is designed to offer superior
performance to a comparable grinder sold by Eytchison’s main
competitor. The competing grinder sells for $52,000 and needs to be
replaced after 1,000 hours of use. It also requires $9,800 of
preventive maintenance during its useful life. Model OK-23’s
performance capabilities are similar to the competing grinder with
two important exceptions—it needs to be replaced only after 3,000
hours of use and...
McDermott Company has developed a new industrial component called IC-75. The company is excited about IC-75...
McDermott Company has developed a new industrial component
called IC-75. The company is excited about IC-75 because it offers
superior performance relative to the comparable component sold by
McDermott’s primary competitor. The competing part sells for $1,360
and needs to be replaced after 2,160 hours of use. It also requires
$280 of preventive maintenance during its useful life.
The IC-75’s performance capabilities are similar to its
competing product with two important exceptions—it needs to be
replaced after 4,320 hours of...
McDermott Company has developed a new industrial component called IC-75. The company is excited about IC-75...
McDermott Company has developed a new industrial component
called IC-75. The company is excited about IC-75 because it offers
superior performance relative to the comparable component sold by
McDermott’s primary competitor. The competing part sells for $1,400
and needs to be replaced after 2,200 hours of use. It also requires
$300 of preventive maintenance during its useful life.
The IC-75’s performance capabilities are similar to its
competing product with two important exceptions—it needs to be
replaced after 4,400 hours of...
Northern Advanced Technology Company (NATC) has developed a new product that includes the production of a...
Northern Advanced
Technology Company (NATC) has developed a new product that includes
the production of a complex part. The manufacture of this part
requires a high degree of technical skill. Management believes
there is a good opportunity for its technical force to learn and
improve as they become accustomed to the production process. The
production of the first unit requires 10,000 direct labor hours.
Management projects a 90% learning curve and wants to produce a
total of 16 units.
Required:...
8) A scientific supply company has developed a new breed of lab rat, which it claims...
8) A scientific supply company has developed a new breed of lab
rat, which it claims weighs the same as the classic white rat. The
population mean (and standard deviation) for the classic white rat
is 485 grams (20 grams). A researcher obtained a sample of 76 of
the new breed of rats, weighed them, and found M = 500 grams (SD =
12 grams). What test should he do to see if the company’s claim is
true? Complete the...
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- This is all one question, thank you so much in advance! You must evaluate a proposal...
- X Company is considering the purchase of a new processor that costs $200,000. Shipping and setup...
- There are a large number of tasks involved in information technology and programming, and many of...
- Using one quantitative and one qualitative health policy research method described in this chapter, design a...
- What is the Rawls' solution to the age-old question of social (economic / distributive) justice?...
- St. Johns River Shipyards' welding machine is 15 years old, fully depreciated, and has no salvage...
- The following information is available for Robstown Corporation for 20Y8: Inventories January 1 December 31 Materials...
ADVERTISEMENT