Billy Brown, owner of Billy refrigeration unit. The van would cost $99,000, have an eight-year useful life, and generate cost savings of $19,500 per year compared to the van currently being used, Also, Billy estimates the new van would result in the sale of 1,800 more litres of ice cream each year, which has a contribution margin of $2 per litre. (Ignore income taxes) Required: 1. What would be the total annual cash inflows associated with the new van for capital budgeting purposes? Total annunl cash infiows 2. Calculate the IRR promised by the new van. (Hint. Use Microsoft Excel to calculate the discount factor(s).) (Do not round intermediate calculations and round your final answer to one decimal place.) Internal rate of retun 3. Assume that in addition to the cash flows described above, the van will have a $18,000 salvage value at the end of eight years. Calculate the IRR. (Hint Use Microsoft Excel to calculate the discount factor(s)) (Do not round intermediate calculations and round your final answer to one decimal place.) Internal rate of retum
Billy Brown, owner of Billy refrigeration unit. The van would cost $99,000, have an eight-year useful life, and generate cost savings of $19,500 per year compared to the van currently being used, Also, Billy estimates the new van would result in the sale of 1,800 more litres of ice cream each year, which has a contribution margin of $2 per litre. (Ignore income taxes) Required: 1. What would be the total annual cash inflows associated with the new van for capital budgeting purposes? Total annunl cash infiows 2. Calculate the IRR promised by the new van. (Hint. Use Microsoft Excel to calculate the discount factor(s).) (Do not round intermediate calculations and round your final answer to one decimal place.) Internal rate of retun 3. Assume that in addition to the cash flows described above, the van will have a $18,000 salvage value at the end of eight years. Calculate the IRR. (Hint Use Microsoft Excel to calculate the discount factor(s)) (Do not round intermediate calculations and round your final answer to one decimal place.) Internal rate of retum
Financial And Managerial Accounting
15th Edition
ISBN:9781337902663
Author:WARREN, Carl S.
Publisher:WARREN, Carl S.
Chapter26: Capital Investment Analysis
Section: Chapter Questions
Problem 5MAD: Home Garden Inc. is considering the construction of a distribution warehouse in West Virginia to...
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