Math

posted by .

A manufacturing company is thinking of launching a new product. The company expects to sell $950,000 of the new product in the first year and $1,500,000 each year thereafter. Direct costs including labor and materials will be 45% of sales. Indirect incremental costs are estimated at $95,000 a year. The project requires a new plant that will cost a total of $1,500,000, which will be a depreciated straight line over the next 5 years. The new line will also require an additional net investment in inventory and receivables in the amount of $200,000.

Assume there is no need for additional investment in building the land for the project. The firm's marginal tax rate is 35%, and its cost of capital is 10%.

To receive full credit on this assignment, please show all work, including formulae and calculations used to arrive at financial values.

Assignment Guidelines:

· Using the information in the assignment description:

o Prepare a statement showing the incremental cash flows for this project over an 8-year period.

o Calculate the payback period (P/B) and the net present value (NPV) for the project.

o Answer the following questions based on your P/B and NPV calculations:

§ Do you think the project should be accepted? Why?

§ Assume the company has a P/B (payback) policy of not accepting projects with life of over 3 years.

§ If the project required additional investment in land and building, how would this affect your decision? Explain

  • Math -

    We do not do your homework for you. Although it might take more effort to do the work on your own, you will profit more from your effort. We will be happy to evaluate your work though.

Respond to this Question

First Name
School Subject
Your Answer

Similar Questions

  1. Accounting

    1. The company uses a job-order costing system. How would you recommend that manufacturing overhead cost be assigned to production?
  2. accounting

    The accounting records of NuTronics, Inc., include the following information for the year ended December 31, 2011. Dec. 31 Jan. 1 Inventory of materials $ 24,000 $ 20,000 Inventory of work in process 8,000 12,000 Inventory of finished …
  3. Managerial finance

    Superior Manufacturing is lauching a new product, that is expected to sell $950,000 of its new product the first year alone, and $1,500,000 each year thereafter. Direct cost labor and materials will be 55% in sales.indirect cost is …
  4. Fin&Acc

    B3 Company is a manufacturing firm that uses job-order costing. The company's inventory balances were as follows at the beginning and end of the year: Beginning Ending Raw materia $26,000 $31,000 Work in process 77,000 59,000 Finished …
  5. Finance

    Unit 4 Individual Project Deliverable Length: 2-3 pages Details: A manufacturing company is thinking of launching a new product. The company expects to sell $950,000 of the new product in the first year and $1,500,000 each year thereafter. …
  6. accounting

    A company has an overhead application rate of 125% of direct labor costs. How much overhead would be allocated to a job if it required total direct labor cost of $20,000?
  7. Math

    A manufacturing firm is thinking of launching a new product. The firm expects to sell $950,000 of the new product in the first year and $1,500,000 each year thereafter. Direct costs including labor and materials will be 45% of sales. …
  8. Accounting

    Montana Company produces basketballs. It incurred the following costs during the year. Direct materials: $14,032 Direct Labor: $25,706 Fixed manufacturing overhead: $9,698 Variable manufacturing overhead: $32,164 Selling Costs: $21,176 …
  9. Finance

    A manufacturing company is thinking of launching a new product. The company expects to sell $950,000 of the new product in the first year and $1,500,000 each year thereafter. Direct costs including labor and materials will be 45% of …
  10. Math

    A manufacturing company is thinking of launching a new product. The company expects to sell $950,000 of the new product in the first year and $1,500,000 each year thereafter. Direct costs including labor and materials will be 45% of …

More Similar Questions