Finance

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.

  1. 👍 0
  2. 👎 0
  3. 👁 93
asked by Anonymous

Respond to this Question

First Name

Your Response

Similar Questions

  1. finance

    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: •

    asked by liza on November 18, 2010

  2. Math Accounting

    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

    asked by Greg on April 9, 2014

  3. Corporate Finance

    A company wants to build a new factory for increased capacity. Using 3 capital budgeting methods, make a determination about the economic viability of the proposal using the following information. Building a new factory will

    asked by Linda on May 16, 2010

  4. Budgeting

    A quaint but well-established coffee shop, the Hot New Café, wants to build a new café for increased capacity. It’s expected sales are $800,000 for the first 5 years. Direct costs including labor and materials will be 50% of

    asked by Shannon on March 9, 2013

  5. finance

    All techniques with NPV profile- mutually exclusive projects. Projects A and B, of equal risk. Are alternatives for expanding Rosa Company’s capacity. The firm’s cost of capital is 13%. The cash flows for each project are

    asked by Vanessa on January 2, 2012

  6. financ

    All techniques with NPV profile- mutually exclusive projects. Projects A and B, of equal risk. Are alternatives for expanding Rosa Company’s capacity. The firm’s cost of capital is 13%. The cash flows for each project are

    asked by Vanessa on January 4, 2012

  7. economics

    2. A company is considering building a bridge across a river. The bridge would cost $2 million to build and nothing to maintain. The following table shows the company¡¯s anticipated demand over the lifetime of the bridge: Price

    asked by tianbai on November 13, 2007

  8. econ.

    2. A company is considering building a bridge across a river. The bridge would cost $2 million to build and nothing to maintain. The following table shows the company¡¯s anticipated demand over the lifetime of the bridge: Price

    asked by fred on June 11, 2011

  9. math (please help)

    A company's retained earnings increased $375,000 last year and its assets increased $973,000. The company declared a $79,000 cash dividend during the year. What was last year's net income?

    asked by samantha on September 12, 2015

  10. accounting

    1. Present entries to record the following summarized operations related to production for a company using a job order cost system: Please put a DR before your debits and and CR before credits and enter between each entry. (a)

    asked by Kassai on July 24, 2012

More Similar Questions