Reference no: EM132438259
Question - The Barnhardt Corporation developed a new product that it believes will have broad market appeal. The company's recent cost and marketing studies revealed the following:
a. New equipment costing $360,000 would need to be acquired to produce the product. The equipment is estimated to have a six-year useful life, with no salvage value at the end of the six years.
b. Sales in units over the next six years are projected as follows:
|
Year
|
Unit Sales
|
|
1
|
20,000
|
|
2
|
30,000
|
|
3
|
50,000
|
|
4
|
60,000
|
Production and sales of the new product would require working capital of $450,000 to finance accounts receivable, inventory, and day-to-day cash needs. This working capital would be released at the end of the project's life.
c. The product would sell for $35 each; variable costs for production, administration, and sales would be $22 per unit.
d. Fixed costs would total $240,000 per year. These fixed costs are for salaries, maintenance, property taxes, insurance, and straight-line depreciation on the new equipment (see item a. above). Note that the annual depreciation on the new equipment referenced in item a. above is on a straight-line basis over the six-year life.
e. To gain rapid entry into the market, the company would need to advertise heavily.
The advertising program would be:
|
Year
|
Annual Advertising
|
|
1-2
|
$200,000
|
|
3
|
$180,000
|
|
4-6
|
$120,000
|
f. The company's required rate of return is 20%. Ignore taxes.
Required -
1. Determine the net present value of the investment. To accomplish this, you must first construct a schedule that shows the calculation of cash flows for the current year and for years 1 through 6. Then, calculate the NPV assuming a discount factor of 20%. Ignore taxes.
2. Would you recommend that Barnhardt Corporation accept the new product in its product line? Why or why not?
|
Compute the economic order quantity
: Widget Co. has the following data available relative to its investment in materials:
|
|
Forecast to increase sales-revenues
: Expansion into Western Europe has a forecast to increase sales/revenues and cost of sales by 10% per year for 5 years.
|
|
ACC-203 Personal Income Tax Assignment Problem
: ACC-203 Personal Income Tax Assignment Help and Solution, Bunker Hill Community College, USA. Calculate their Net investment income tax
|
|
Marginal corporate tax rate
: She also tells you that other than what is noted in each project scenario, all other costs will remain constant, and you should remember to only
|
|
Determine the net present value of the investment
: The product would sell for $35 each; variable costs for production, administration, Determine the net present value of the investment
|
|
How are gross profit and net income changing
: How are gross profit and net income changing, as dollar values?
|
|
What does malware free mean
: What does "malware free"mean? How can a user demonstrate that their computer or device is malwarefree?
|
|
Compute Juan regular overtime gross and net pay
: Juan Padronas works for H&C Commercial Builders, Inc. His pay rate is $13.00 per hour. Compute Juan's regular, overtime, gross, and net pay
|
|
Data encryption importance
: Do you believe that all data should be encrypted? Many computing professionals think this is a good idea.
|