Math Accounting

posted by .

Determine the proposal’s appropriateness and economic viability. For all scenarios, assume spending occurs on the first day of each year and benefits or savings occurs on the last day. Assume the discount rate or weighted average cost of capital is 10%. Ignore taxes and depreciation.



New Factory

A company wants to build a new factory for increased capacity. Using the net present value (NPV) method of capital budgeting, determine the proposal’s appropriateness and economic viability with the following information:

• Building a new factory will increase capacity by 30%.
• The current capacity is $10 million of sales with a 5% profit margin.
• The factory costs $10 million to build.
• The new capacity will meet the company’s needs for 10 years.
• The factory is worth $14 million over 10 years

Respond to this Question

First Name
School Subject
Your Answer

Similar Questions

  1. calculating annuity

    IF a company will generate 80,000 in annual revenue each year for the next eight years and the interest rate is 8.2% what is the present value of the savings?
  2. Management Accounting

    Deer Valley Lodge, a ski resort in the Wasatch Mountains of Utah, has plans to eventually add five new chair lifts. Suppose that one lift costs $2 million and preparing the slope and installing the lift costs another $1.3 million. …
  3. Managerial Accounting

    a ski company plan to add five new chai500 a day for the lift. the lifts cost 2 million and to install the lift cost another 1.3 mil.The lift will allow 300 additional skiers on the slopes but only 40 days a year will be needed. The …
  4. Finance

    Milwaukee Surgical Supplies, Inc., sells on terms of 3/10, net 30. Gross sales for the year are $1,200,000 and the collections department estimates that 30% of the customers pay on the tenth day and take discounts, 40% pay on the thirtieth …
  5. Finance

    A company wants to buy a labor-saving piece of equipment. Using the NPV method of capital budgeting, determine the proposal's appropriateness and economic viability with the following information: Labor content is 12% of sales, which …
  6. finance

    A company wants to buy a labor-saving piece of equipment. Using the NPV method of capital budgeting, determine the proposal’s appropriateness and economic viability with the following information: • Labor content is 12% of sales, …
  7. finance

    A company wants to invest in a new advertising program. Using the NPV method of capital budgeting, determine the proposal’s appropriateness and economic viability with the following information: • The new program will increase …
  8. accounting

    Salt River Copmany is evaluating a capital expenditure propsal that has the following predicted cash flows: Intial investment $(43,270) Operation Year 1 20,000 Year 2 30,000 Year 3 10,000 Salvage 0 a. Using a discount rate of 14 percent, …
  9. accounting

    Salt River Copmany is evaluating a capital expenditure propsal that has the following predicted cash flows: Intial investment $(43,270) Operation Year 1 20,000 Year 2 30,000 Year 3 10,000 Salvage 0 a. Using a discount rate of 14 percent, …
  10. Economics

    A city must decide whether to build a downtown parking garage and what rate to charge. It is considering two rates: a flat $1.50-per-hour rate or an all-day rate averaging $1 per hour (based on a $10 daily rate and an average 10-hour …

More Similar Questions