Oakmont Company has an opportunity to manufacture and sell a new product for a four-year period. The company's discount rate is17%. After careful study, Oakmont estimated the following costs and revenues for the new product:Cost of equipment neededWorking capital neededOverhaul of the equipment in two yearsSalvage value of the equipment in four yearsAnnual revenues and costs:Sales revenues$ 155,000$ 65,000$ 9,000$ 14,500$ 300,000Variable expenses$ 145,000Fixed out-of-pocket operating costs$ 75,000When the project concludes in four years the working capital will be released for investment elsewhere within the company.Click here to view Exhibit 7B-1 and Exhibit 7B-2, to determine the appropriate discount factor(s) using tables.Net present valueRequired:Calculate the net present value of this investment opportunity.Note: Round your final answer to the nearest whole dollar amount.

NPV (Net Present Value) is a financial metric used to evaluate the profitability of an investment by…

Answered: Dakmont Company has an opportunity to…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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DSSS CorporationDSSS Corporation is considering a new project to manufacture widgets. The cost of the manufacturing equipment is $135,000. The cost of shipping and installation is an additional $2,600. The asset will fall into the 3-year MACRS class. The year 1- 4 MACRS percentages are 33.33%, 44.45%, 14.81%, and 7.41%, respectively. Sales are expected to be $215,000 per year. Cost of goods sold will be 64% of sales. The project will require an increase in net working capital of $2,600. At the end of three years, DSSS plans on ending the project and selling the manufacturing equipment for $30,000. The marginal tax rate is 36% and DSSS Corporation’s appropriate discount rate is 12%. The fixed expenses is $12,000.Refer to DSSS Corporation. What is the initial investment outlay for this project? Group of answer choices $140200 $150,200 $35,000 $130,200
Sales of a product toy named Scooby estimated at 80,000 pieces annually with a rate of 6 pu. Its variable mfg costs are 2.50 pu with S&D and general expenses related to Scooby is 59,000 on annual basis. Its fixed manufacturing costs (excluding depreciation) at 45,000 on annual basis. Investment made is 350,000 with related to various moulds & equipment. The equipment have a 3 year life with ending salvage value of 20,000 where it was followed SLM depreciation.The rate of tax will be at 40%. Required: Estimated increase in annual level of net income from the planned manufacture and sale of Scooby toys.
The company is considering a project involving the purchase of new equipment. Cost of equipment needed $420,000 Working capital needed $45,000 Overhaul of equipment in four years $35,000 Salvage value of the equipment in five years is $35,000 Annual revenues and costs: Sales revenues $385,000 Cost of goods sold $210,000 Out-of- pocket operating costs $65,000 Discount rate is 11 % . What is the net present value of the project? The internal rate of return is between what two whole discount rates?
A company plans to purchase a new machine due to the expected demand for anew product. The machine costs Ghc185,000 and it is expected that the machineshall be used for five (5) years with a scrap value of Ghc15,000. The companyexpects the demand for the product to be as follows: Year 1 2 3 4 5 Demand (Units) 25,000 30,000 35,000 40,000 20,000 Increase Selling Price 2% per year Variable Cost of production Fixed production expenses 3% per year5% per year The company’s cost of capital is 10% and pays corporate tax at a rate of 25% inthe related year. Calculate the Net Present Value (NPV) of purchasing the newmachine advice whether it makes economic sense to buy the new machine.
Net Present Value Analysis Oakmont Company has an opportunity to manufacture and sell a new product for a four-year period. The company’s discount rate is 15%. After careful study, Oakmont estimated the following costs and revenues for the new product: When the project concludes in four years the working capital will be released for investment elsewhere within the company. Required: Calculate the net present value of this investment opportunity.
Required information [The following information applies to the questions displayed below] Cardinal Company is considering a five-year project that would require a $2,975,000 investment in equipment with a useful life of five years and no salvage value. The company's discount rate is 14%. The project would provide net operating income in each of five years as follows: Sales Variable expenses Contribution margin Fixed expenses: Advertising, salaries, and other fixed out-of- pocket costs $ 735,000 595,000 2. What are the project's annual net cash inflows? $ 2,735,000 1,000,000 1,735,000 Depreciation Total fixed expenses Net operating income Click here to view Exhibit 7B-1 and Exhibit 7B-2. to determine the appropriate discount factor(s) using table. 1,330,000 $ 405,000
Vinubhai
Sagar
B2B Company is considering the purchase of equipment that would allow the company to add a new product to its line. The equipment costs $240,000 and has a 12-year life and no salvage value. The expected annual income for each year from this equipment follows. Sales of new product $ 150,000 Expenses Materials, labor, and overhead (except depreciation) 80,000 Depreciation—Equipment 20,000 Selling, general, and administrative expenses 15,000 Income $ 35,000 (a) Compute the annual net cash flow.(b) Compute the payback period.(c) Compute the accounting rate of return for this equipment.
Stranger Things Corporation is planning to add a new product to its line. To package this product, the company needs to buy a new machine at a cost of $518,000 cost with an expected four-year life and $15,000 salvage value. Additional annual information for this new product line follows: Sales of new product Cost of Goods Sold (does not include depreciation) Selling, general, and administrative expenses (does not include depreciation) Required: (1) Determine income and net cash flow for each year of this machine's life. $ 1,750,000 1,248,000 (2) Compute this machine's payback period, assuming that cash flows occur evenly throughout each year. 315,000 (3) Compute net present value for this machine using a discount rate of 5%. Use the Present Value Tables below.
Godo
B2B Company is considering the purchase of equipment that would allow the company to add a new product to its line. The equipment costs $144,000 and has a 12-year life and no salvage value. The expected annual income for each year from this equipment follows. Sales of new product $ 90,000 Expenses Materials, labor, and overhead (except depreciation) 48,000 Depreciation—Equipment 12,000 Selling, general, and administrative expenses 9,000 Income $ 21,000 (a) Compute the annual net cash flow.(b) Compute the payback period.(c) Compute the accounting rate of return for this equipment. I could not include an image for "C" please answer seperately

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