Compute the npv and irr, Financial Accounting

Assignment Help:

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?


Related Discussions:- Compute the npv and irr

Qualitative characteristics , Since 1968, Dracula Limited has traded in Don...

Since 1968, Dracula Limited has traded in Doncaster, South Yorkshire as a manufacturer of fancy-dress and theatrical costumes. It produces a wide range of general theatrical costum

Modern advanced accounting, Problem 1 (28 marks) Pre-Contribution Balance ...

Problem 1 (28 marks) Pre-Contribution Balance Sheets and Fair Values June 30, 20X9 (in thousands of $) Swag Co. Perk Ltd. Pre- Contribution Fair Value Pre- Contributi

Accounting changes can affect the financial statement, Various types of acc...

Various types of accounting changes can affect the financial statements of a business enterprise differently. Assume that the following list describes changes that have a material

What is asset, Q. What is Asset? Asset - An economic resource which is ...

Q. What is Asset? Asset - An economic resource which is expected to be of benefit in the future. Probable futureeconomic benefits attained as a result of past transactions or e

Mutual dealings-bankruptcy and liquidation, MUTUAL DEALINGS A right of ...

MUTUAL DEALINGS A right of set-off is allowed where there have been - (a) Mutual credits, debts or other dealings resulting in pecuniary liabilities, (b) Between the debtor an

Estimate the systematic risk of the new investment, Q. Estimate the systema...

Q. Estimate the systematic risk of the new investment? The beta of the comparator company will be utilized to estimate the systematic risk of the new investment. No un-gearing

Illustration for company conversion-partnership, Illustration for company c...

Illustration for company conversion Kamau Maneno and Rotino have carried on partnership for several years, sharing profits and losses equally after allowing for annual salaries

Make journal entries required to dispose off, make journal entries require...

make journal entries required to dispose off over or under applied manufacturing overhead assuming it is allocated among work in process, finished goods and cost of goods sold ba

Abbreviated cash budget, I need to know how to do a problem and whether I ...

I need to know how to do a problem and whether I am missing information.

Dangers of over-reliance on trade credit, Dangers of over-reliance on trade...

Dangers of over-reliance on trade credit In effect for the reason that trade credit represents temporary borrowing from suppliers until invoices are paid it becomes an importan

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd