1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
fiasKO [112]
3 years ago
13

We are evaluating a project that costs $1.68 million, has a six-year life, and has no salvage value. Assume that depreciation is

straight-line to zero over the life of the project. Sales are projected at 90,000 units per year. Price per unit is $37.95, variable cost per unit is $23.20, and fixed costs are $815,000 per year. The tax rate is 21 percent, and we require a return of 11 percent on this project. Suppose the projections given for price, quantity, variable costs, and fixed costs are all accurate to within ±10 percent.
Required:
Calculate the best-case and worst-case NPV figures.
Business
1 answer:
zvonat [6]3 years ago
3 0

Answer:

                              Best-Case        Worst-Case

                                  NPV                     NPV

PV of cash inflows $2,897,706      $3,187,477

PV of project cost  $1,680,000     $1,848,000 ($1,680,000 * 1.1)

NPV                         $1,217,706    $1,339,477

Explanation:

a) Data and Calculations:

Initial project cost = $1.68 million

Project's estimated life = 6 years

Salvage value = $0

Depreciation expense = $280,000 ($1.68 million/6)

Income Statement:

Sales revenue (90,000 * $37.95) = $3,415,500

Cost of goods sold:

Variable cost (90,000 * $23.20) =    2,088,000

Gross profit =                                    $1,327,500

Fixed costs =                                         815,000

Income before tax =                           $512,500

Income tax (21% of $512,500) =          107,625

Net income =                                     $404,875

Add depreciation expense                280,000

Annual cash inflows =                      $684,875

PV annuity factor for 6 years at 11% = 4.231

PV of annual cash inflows of $684,875= $2,897,706 ($684,875 * 4.231)

Annual cash inflows = $753,363 ($684,875 * 1.1)

PV of annual cash inflows of $753,363 = $3,187,477 ($753,363 * 4.231)

You might be interested in
Rebotar Inc, makes basketballs. Their fixed costs are $3450 Variable costs are $12 per basketball, If the basketball is priced a
worty [1.4K]

Answer:

Break-even points = 265.38

Explanation:

Given:

Fixed cost = $3,450

Variable costs = $12

Selling price = $25

Number of balls sold = 300

Find:

Break even costs

Computation:

Contribution per unit = Sales - Variable costs

Contribution per unit = $25- $12

Contribution per unit = $13

Break-even points = Fixed cost / Contribution per unit

Break-even points = $3,450 /$13

Break-even points = 265.38

6 0
3 years ago
What should be considered when developing a sample design
Fudgin [204]
Such considerations include understanding of:
the reasons for and objectives of sampling.
the relationship between accuracy and precision.
the reliability of estimates with varying sample size.
the determination of safe sample sizes for surveys.
the variability of data.

4 0
3 years ago
Identify which basic principle of accounting is best described in each item below.
adelina 88 [10]

Answer:

The Matching Principle

Explanation:

The Matching Principle of accounting holds that revenues should be matched with expenses. Hence the name.

This is to say, that revenues should only be recognized when the associated expenses with those revenues have been spent.

For example, in numeral a), we can see that Norfolk Southern Corporation recieved cash in advance, but it only recognized revenue once it had performed the services associated with that cash collection.

4 0
3 years ago
g Ms. White has entered the housing market in search of a suitable home. She has saved $10,000 for a down payment and has found
Svetradugi [14.3K]

Answer:

$89,418

Explanation:

It is important to realize that Ms. White has been honoring her mortgage payments for the 18 months that she owned the house.

So we can determine the amount of outstanding debt by constructing an amortization table.

Here, i will use a Financial Calculator to prepare the amortization table.

PV = $90,000

N = 20

I = 12

FV = 0

P/YR = 1

PMT = $11,172.93 (CALCULATED)

Period                 Principle        Interest        Payment            Balance

Beginning                                                                                $90,000

Year 1 End         $373              $ 10,800        $11,173               $89,627

Year 2 End        $417               $ 10,755         $11,173              $89,209

But for the Year 2 she only owned the house for 6 month (to 18 months).

Thus amount outstanding after 18 months is $89,418 ($89,627 - $209)

3 0
3 years ago
In a market economy, buying decision are made by consumer
stiv31 [10]

Answer:

customers

Explanation:

they are the one who buys products that factories make

5 0
3 years ago
Other questions:
  • warnerwoods compute the cost assigned to ending inventory using (a) FIFO, (b) LIFO, (c) weighted average, and (d) specific ident
    9·1 answer
  • Thomson Trucking has $12 billion in assets, and its tax rate is 25%. Its basic earning power (BEP) ratio is 18%, and its return
    9·1 answer
  • Taxes are a part of a civil society, but they have a significant effect on supply and demand for goods. A tax is an extra cost a
    8·1 answer
  • When an owner records a credit for $650 for revenue earned but not yet recieved, the amount of the debit should be
    9·1 answer
  • Middleton Corporation uses the normal costing system to determine the amount of overhead to be applied to production. The predet
    9·1 answer
  • Which of the following will most likely give the most assurance concerning the valuation assertion about accounts receivable?A.
    8·1 answer
  • The FDA recommends the use of three risk designations when evaluating operations. Which designation is for actions and procedure
    13·1 answer
  • 1. At December 1, 2022, Swifty Corporation Accounts Receivable balance was $12770. During December, Swifty had credit sales of $
    14·1 answer
  • Which of the following skills do employers in any field expect their employees<br> to have?
    11·2 answers
  • Match each action to their correct definitions.
    8·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!