Compute the npv and irr, Financial Accounting

Question:

Consider a project that involves the purchase of a $100,000 machine.  The machine will last for three years.  It is expected to produce 20,000 units per year.  The sales price for each unit will be $32, and variable costs will be $25 per unit.  The project will also incur fixed labor costs of $45,000 per year.  It will require no additional investment in net working capital and is expected to have a salvage value of $5,000 in three years.  The machine will be depreciated using the MACRS schedule below (note that this schedule has 4 years of depreciation, but the machine will be sold after 3 years).  The tax rate is 40%, and the discount rate is 10%.  You may want do this problem in Excel, and then copy the numbers into your Word document.

Year

MACRS %

1

33

2

44

3

15

4

8

(a) Construct a table of the relevant cash flows for this project, and compute the NPV and IRR of the project. 

(b) What is the minimum unit price (to the nearest cent) that would justify investment?

Posted Date: 2/16/2013 5:24:45 AM | Location : United States







Related Discussions:- Compute the npv and irr, Assignment Help, Ask Question on Compute the npv and irr, Get Answer, Expert's Help, Compute the npv and irr Discussions

Write discussion on Compute the npv and irr
Your posts are moderated
Related Questions
Trade Sources of Information Within for instance the credit card industry it isn't uncommon for information on an individual's credit rating to be shared. In a alike vein withi

Problem: (a) Many businesses find it useful to maintain a control account in respect of both their trade receivables and trade payables. Describe why such control accounts ar

Question Capital Expenditure Decisions and Investment Criteria Bodmin plc Bodmin plc is a highly profitable electronics company that manufactures a range of innovative produ

Absorption costing is a cost accounting method that tries to charge all direct costs and all production costs of an organization to specific units of pr

The following accounts and balances have been taken from the general ledger trial balance of Daiton Repairs Limited as at October 31, 19×2, after its first year of operation. Adjus

Can you combined the PVH & Warnaco Group Balance Sheet after merger?I will an attached the excel worksheet that includes the instructions

profit margin 2.5%, equity multiplier 2.0,sales $50000, common equity $25000.compute return on common equity.

INCOME ACCOUNT (a) Classification : Income will be classified under appropriate headings: Rents; Interest on Government securities; Dividends; Interest on

Interest revenue: At the end of 2012, a manufacturer sells machinery to a customer for $90,000. $30,000 is paid immediately, and the customer signs a promissory note for the r

CONSOLIDATED INCOME STATEMENT AND CONSOLIDATED STATEMENT OF CHANGES IN EQUITY     The consolidated income statement follows similar principles as those of the consolidated balanc