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

Types of temporary differences-financial statement, Types of temporary diff...

Types of temporary differences There are two main types of temporary differences; 1) Taxable temporary difference : If the carrying amount is more than the tax base then

Determine the present value of the bonds payable, Mason Co. issued $860,000...

Mason Co. issued $860,000 of 5 year, 13% with interest payable semiannually, at a market (efffective) interest rate of 12% Determine the present value of the bonds payable, using t

Example of abc analysis, Illustration: Dinesh Limited is looking selective...

Illustration: Dinesh Limited is looking selective control for its inventories. By using the subsequent datas, prepare the ABC plan. Items                 A           B

Calculate the total capital, The current balance sheet of CBKH shows $800 m...

The current balance sheet of CBKH shows $800 million of corporate loans ($500 million of which being rated AA- and the remaining rated BBB+), $200 million of bonds issued by an OEC

Journal entries to record transactions in the general fund, A village orde...

A village ordered supplies for its Fire Department at an estimated cost of $16,700. The supplies were received with an invoice for $16,800. The village accepted the shipment and th

Maximize revenues from sales, You are a manager at the DaimlerChrysler. Dai...

You are a manager at the DaimlerChrysler. Daimler-Chrysler has lost money on the Smart car since the first model rolled off the assembly line in 1998. By bringing its little car in

EDP, For what EDP is using in accounting

For what EDP is using in accounting

Assume that you are the president of gaslight company., Assume that you are...

Assume that you are the president of Gaslight company. At the end of the year (December 31, 2011 of operation.

Operating and capital leases, In 200 words or more, discuss the issues that...

In 200 words or more, discuss the issues that relate to the accounting for operating and capital leases. In your posting, please articulate issues that the accountant faces in r

Shorter discounting periods, Occasionally cash flows may have to be discoun...

Occasionally cash flows may have to be discounted more often than once a year semi- monthly, daily, annually or quarterly.  The outcome of this is as fold (i)  The number of per

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