Please help me, thank you Frank Co. has the opportunity to introduce a new product. Frank expects the product to sell for P60 and to have per-unit variablecosts of P35 and annual cash fixed costs of P4,000,000. Expected annual sales volume is 275,000 units. The equipment neededto bring out the new product costs P6,000,000, has a four-year life and no salvage value, and would be depreciated on a straight-line basis. Frank's cost of capital is 14% and its income tax rate is 40%.Required:a. Compute the annual net cash flows for the investment.b. Compute the NPV of the project.c. Suppose that some of the 275,000 units expected to be sold would be to customers who currently buy another of Frank'sproducts, the X-10, which has a P12 per-unit contribution margin. Find the sales of X-10 that can Frank lose per year andstill have the investment in the new product return at least the 14% cost of capital.d. Suppose that selling the new product has no complementary effects but that Frank's production engineers anticipate someproduction problems in making the new product and are not confident of the P35 estimate of per-unit variable costs for thenew product. Find the amount by which Frank's estimate of per-unit variable cost could be in error and the investment stillhave a return at least equal to the 14% cost of capital.

a) The equipment is to be depreciated using straight line method of depreciation. Depreciation =…

Frank Co. has the opportunity to introduce a new product. Frank expects the product to sell for P60 and to have p osts of P35 and annual cash fixed costs of P4,000,000. Expected annual sales volume is 275,000 units. The equ o bring out the new product costs P6,000,000, has a four-year life and no salvage value, and would be depreciate ne basis. Frank's cost of capital is 14% and its income tax rate is 40%. Required: 1 Compute the annual net cash flows for the investment. . Compute the NPV of the project. . Suppose that some of the 275,000 units expected to be sold would be to customers who currently buy and products, the X-10, which has a P12 per-unit contribution margin. Find the sales of X-10 that can Frank los still have the investment in the new product return at least the 14% cost of capital. 1. Suppose that selling the new product has no complementary effects but that Frank's production engineers a production problems in making the new product and are not confident of the P35 estimate of per-unit variab new product. Find the amount by which Frank's estimate of per-unit variable cost could be in error and the have a retum at least equal to the 14% cost of capital.

Frank Co. has the opportunity to introduce a new product. Frank expects the product to sell for P60 and to have p osts of P35 and annual cash fixed costs of P4,000,000. Expected annual sales volume is 275,000 units. The equ o bring out the new product costs P6,000,000, has a four-year life and no salvage value, and would be depreciate ne basis. Frank's cost of capital is 14% and its income tax rate is 40%. Required: 1 Compute the annual net cash flows for the investment. . Compute the NPV of the project. . Suppose that some of the 275,000 units expected to be sold would be to customers who currently buy and products, the X-10, which has a P12 per-unit contribution margin. Find the sales of X-10 that can Frank los still have the investment in the new product return at least the 14% cost of capital. 1. Suppose that selling the new product has no complementary effects but that Frank's production engineers a production problems in making the new product and are not confident of the P35 estimate of per-unit variab new product. Find the amount by which Frank's estimate of per-unit variable cost could be in error and the have a retum at least equal to the 14% cost of capital.

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter19: Capital Investment

Section: Chapter Questions

Problem 10E: Roberts Company is considering an investment in equipment that is capable of producing more...

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