Sales volume reaches the maximum capacity, Financial Accounting

Assignment Help:

Sales volume reaches the maximum capacity of the new machine in Year 4.

577_Sales volume reaches the maximum capacity.png

1692_Sales volume reaches the maximum capacity1.png

The positive NPV point to that the investment in Machine Two is financially acceptable although the NPV is so small that there is likely to be a significant possibility of a negative NPV.

WORKINGS

933_Sales volume reaches the maximum capacity2.png

Writing down allowances as well as tax benefits

1920_Sales volume reaches the maximum capacity3.png

(c)

Total taxable cash flow = (48100 + 68214 + 90040 + 113234) = $319588

Total depreciation = $215000

Total accounting profit = 319588 - 215000 = $104588

Average annual accounting profit = 104588/4 = $26147

Average investment = 215000/2 = $107500

Return on capital employed = 100 × 26147/107500 = 24·3%

ROCE of 24·3% is somewhat less than the target ROCE of 25% indicating that buying the machine isn't acceptable with respect to this criterion. though evaluation using the net present value approach is preferred for investment advice.


Related Discussions:- Sales volume reaches the maximum capacity

Distinctions between a business combination and a merger, What are the lega...

What are the legal distinctions between a business combination, a merger, and a consolidation? Mergers Vs Acquisitions: When one company takes over another and clearly esta

Calculate and graph the average annual returns , This is an individual asse...

This is an individual assessment contributing 50% of your marks for the module. The assignment is intended to help you develop skills of implementing financial models in Excel. The

Define accounting, Question 1 Define Accounting. Briefly explain the ‘Enti...

Question 1 Define Accounting. Briefly explain the ‘Entity Concept' and ‘Money Measurement Concept' of accounting Question 2 What is rectification of errors? List and explain the

Shareholder value maximization framework , Shareholder value maximization ...

Shareholder value maximization framework The four key elements that affect the shareholder value of a company are Profitability Growth Risk Capital Mark

Concepts in accounting, Mr. Inherits 30000. Decides to open a salon jj salo...

Mr. Inherits 30000. Decides to open a salon jj salon. On 1/4/2016 commits 10000 to the business Opens an a/c in the bank What will be the money under capital in his books on 1/4/10

Financial ratio assignment, Critical Thinking Exercise Instructions: select...

Critical Thinking Exercise Instructions: select a company , Wendy''s or McDonald''s . Perform a Google search, key in McDonalds or Wendys Key financial ratios. I suggest you use f

The fair-value method of accounting for nci., In the current year, Company ...

In the current year, Company A is formed with $630,000 in capital from the sale of 21,000 shares of stock at $30 a share. Company A, which has no other operations, immediately acqu

Perpetual inventory system, In this type of system store balances are recor...

In this type of system store balances are recorded and computed after all receipt and issue. The main focus of this system is to make obtainable details regarding the quantity and

What are the january cash collections from sales, O'Neill Co. has $298,106 ...

O'Neill Co. has $298,106 in accounts receivable on January 1. Budgeted sales for January are $840,001. O'Neill expects to sell 20% of its merchandise for cash. Of the remaining 80%

Common Stock, If you have 10,000 shares of common stock sold at $10 per sha...

If you have 10,000 shares of common stock sold at $10 per share; and 100,000 shares authorized at $1 par value how would you show this on the balance sheet? Also if we issue 10,00

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