Question

Offered Price $15.00

Problem 9-12 Comprehensive Capital Budgeting Problem [LO 2,6]

Question # 00118753
Subject: Economics
Due on: 10/16/2015
Posted On: 10/16/2015 07:07 PM

Rating:
4.1/5
Expert tutors with experiences and qualities
Posted By
Best Tutors for school students, college students
Questions:
1
Tutorials:
0
Feedback Score:

Purchase it
Report this Question as Inappropriate
Question
Van Doren Corporation is considering producing a new product, autodial. Marketing data indicate that the company will be able to sell 55,000 units per year at $30. The product will be produced in a section of an existing factory that is currently not in use.

To produce autodial, Van Doren must buy a machine that costs $450,000. The machine has an expected life of 5 years and will have an ending residual value of $20,000. Van Doren will depreciate the machine over 5 years using the straight-line method for both tax and financial reporting purposes.

In addition to the cost of the machine, the company will incur incremental manufacturing costs of $440,000 for component parts, $484,000 for direct labor, and $247,500 of miscellaneous costs. Also, the company plans to spend $150,000 annually to advertise autodial. Van Doren has a tax rate of 40 percent, and the company’s required rate of return is 14 percent.

What is the Net Present Value: (Calculate using 4 decimal points)
List of Main Subjects
Accounting
Anthropology
Architecture
Art
Asian Studies
Astronomy
Biology
Business
Chemistry
Communications
Computer Science
Economics
Education
Engineering
English
Finance
Foreign Languages
Gender Studies
General Questions
Geography
Geology
Health Care
History
Kindergarten
Law
Linguistics
Literary Studies
Marketing
Mathematics
Music
Nursing
Performing Arts
Philosophy
Physics
Political Science
Psychology
Religious Studies
Sociology
Statistics
Urban Planning and Policy
View all subjects...
Loading...