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

Determine the optimal liquidation quantity, The bid-offer spread as a funct...

The bid-offer spread as a function of daily trading volume is given by :p(q) = a + b*exp(cq) where q = daily trading volume a = 0.08 b= 0.10 c = 0.05 A trader wants to unwind

Vat, a recommendation regarding a current south African vat system

a recommendation regarding a current south African vat system

Describe passive income, Q. Describe Passive Income? Passive Income - I...

Q. Describe Passive Income? Passive Income - Includes income derived from such sources like dividends, royalties, interest, rents, amounts received from personal service contra

Concepts in accounting, J inherited 30000 & decides to open a saloon.1/4/20...

J inherited 30000 & decides to open a saloon.1/4/2016.under jasper.commits 10000 to the business .opens a a/c in the bank as jasper. What will be th capital amount in his books o

Premium coupons , premium coupons that already have been expired should be ...

premium coupons that already have been expired should be or shouldn''t be estimated as liability?

Basics of sundry matters, Basics of Sundry Matters Current accounts...

Basics of Sundry Matters Current accounts balances must always be equal and opposite. The head office current account in the branch books should always have a credit bal

Trade sources of information, Trade Sources of Information Within for i...

Trade Sources of Information Within for instance the credit card industry it isn't uncommon for information on an individual's credit rating to be shared. In a alike vein withi

What do you mean by re - organization, Q. What do you mean by Re - organiza...

Q. What do you mean by Re - organization? Reorganization - This is a change in businesses capital arrangements. If for a CORPORATION there are 7 statutory options for reorganiz

Develop portfolio of investments and trades, The family next door just rece...

The family next door just received a $300,000,000 cash payout after winning the lottery. You talked with them and are trying to convince them to let you manage a portfolio of inves

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