Firm is considering investment opportunity

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Reference no: EM131915759

1. Project B will result in unit sales of 2,000, at a price of $600 each. The variable cost (VC) of each unit is $300. The cost accountant will allocate overhead on the existing plant to Project B at a rate of $21 per unit. A special piece of equipment must be leased for $67,000 per year for purposes related solely to Project B. Project B will reduce sales of the same company’s Project A by 650 units (selling price of $900 with VC of $480 and overhead allocation of $32 per unit). What is the total incremental cash flow for Project B?

$197,200

$260,000

$262,250

$306,200

$327,000

2. Your firm is considering an investment opportunity. Your firm has paid $45,000 for engineering, site surveys, and environmental impact studies. There were no environmental issues so the EPA approved the project. The hard construction costs will be $950,000 to build the project, and the present value of benefits will be $1,075,000. What is the NPV of the project?

$80,000

$100,000

$125,000

$180,000

None of the above

Reference no: EM131915759

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