A company is considering constructing a plant to manufacture a proposed new product. The land costs 300,000.00, the building costs600,000.00, the equipment costs 250,000.00 and 100,000.00 additional working capital is required. It is expected that the product will result insales of P750,000 per year for 10 years, at which time the land can be sold for 400,000.00, the building for 350,000.00 and the equipment for50,000.00. All of the working capital would be recovered at the end of year 10. The annual expenses for labor, materials, and all other items areestimated to total 475,000.00. If the company requires a MARR of 15% per year on projects of comparable risk, determine if it should invest inthe new product line. Evaluate using Payback Period..Payback PeriodPlease answer in this format.Given:Formula (Please use this formula):Payout period (years) = investment – salvage value over net annual cash flowNote: If there is a required value before using the given formula, then solve for it to be able to use the given formula.Solution:

In this we have to calculate initial investment in projects and than calculate the payback…

company is considering constructing a plant to manufacture a proposed new pre 0,000.00, the equipment costs 250,000.00 and 100,000.00 additional working capital es of P750,000 per year for 10 years, at which time the land can be sold for 400,00 000.00. All of the working capital would be recovered at the end of year 10. The annu imated to total 475,000.00. If the company requires a MARR of 15% per year on pro new product line. Evaluate using Payback Period.. yback Period Please answer in this format. Given: Formula (Please use this formula): Payout period (years) = investment – salvage value over net annual cash Neto: If there is a roCuired value bofore using th e given formula then sol

company is considering constructing a plant to manufacture a proposed new pre 0,000.00, the equipment costs 250,000.00 and 100,000.00 additional working capital es of P750,000 per year for 10 years, at which time the land can be sold for 400,00 000.00. All of the working capital would be recovered at the end of year 10. The annu imated to total 475,000.00. If the company requires a MARR of 15% per year on pro new product line. Evaluate using Payback Period.. yback Period Please answer in this format. Given: Formula (Please use this formula): Payout period (years) = investment – salvage value over net annual cash Neto: If there is a roCuired value bofore using th e given formula then sol

Financial Management: Theory & Practice

16th Edition

ISBN:9781337909730

Author:Brigham

Publisher:Brigham

Chapter11: Cash Flow Estimation And Risk Analysis

Section: Chapter Questions

Problem 1P: Talbot Industries is considering launching a new product. The new manufacturing equipment will cost...

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Talbot Industries is considering launching a new product. The new manufacturing equipment will cost $17 million, and production and sales will require an initial $5 million investment in net operating working capital. The company’s tax rate is 25%. What is the initial investment outlay? The company spent and expensed $150,000 on research related to the new product last year. What is the initial investment outlay? Rather than build a new manufacturing facility, the company plans to install the equipment in a building it owns but is not now using. The building could be sold for $1.5 million after taxes and real estate commissions. What is the initial investment outlay?