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

Estimate the cost, Olivia has received a $15 gift certificate that is redee...

Olivia has received a $15 gift certificate that is redeemable only for roasted peanuts. Bags of roasted peanuts come in two sizes, regular and jumbo. A regular bag contains 30 pean

Annual coupon payment, Arnot International's bonds have a present market pr...

Arnot International's bonds have a present market price of $1,250. The bonds have an 11% annual coupon payment, a $1,000 face value, and 10 years left until maturity. The bonds may

Financial mathematics, abc limied is considering whether to invest $90000 ...

abc limied is considering whether to invest $90000 in the purchase of a new item of equipment. The equipment would be paid for with a down-payment of $60000 and the payment of the

Maximum cost recovery deduction, In May of 2010 a calendar year taxpayer, p...

In May of 2010 a calendar year taxpayer, placed in service $2,137,000 of USED 15-year recovery property. The taxpayer has taxable income of $1,175,000 before the cost recover

Portfolio''s new beta., Assume you hold a diversified portfolio having of a...

Assume you hold a diversified portfolio having of a $7,500 investment in every of 20 different common stocks. The portfolio's beta is 2.15. Now, assume you sell one of the stocks w

Illustrate the changing face of accounting, Illustrate the changing face of...

Illustrate the changing face of accounting Over past 25 years, environment within which businesses operate has become increasingly turbulent and competitive. Numerous reasons h

Non-financial factors for non-financial considerations, Q. Non-financial fa...

Q. Non-financial factors for non-financial considerations? There are several non-financial factors which possibly relevant to a decision to contract out and the type of factors

Format for balance sheet, FORMAT FOR BALANCE SHEET The non current asse...

FORMAT FOR BALANCE SHEET The non current assets, current assets and current liabilities sections remain identical to those of a sole proprietorship.  However, the “capital sect

accounting, what organizations are responsible for governing financial rep...

what organizations are responsible for governing financial reporting? what is the role of each organiztion? how have the roles changed in the last 20 years? how might their roles c

Vital essential and desirable analysis, VED Analysis: VED i.e. Vital, E...

VED Analysis: VED i.e. Vital, Essential and Desirable analysis is a technique employed for spare part inventory analysis and is broadly used in the automobile industry particul

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