A company will sell Gizmos to consumers at a price of $112 per unit. The variable cost
Question:
A company will sell Gizmos to consumers at a price of $112 per unit. The variable cost to produce Gizmos is $24 per unit. The company expects to sell 12,000 Gizmos to consumers each year. The fixed costs incurred each year will be $170,000. There is an initial investment to produce the goods of $2,900,000 which will be depreciated straight line over the 19 year life of the investment to a salvage value of $0. The opportunity cost of capital is 11% and the tax rate is40%.
What is operating cash flow each year?
Using the an annual operating cash flow of $542,650, what is the net present value of this investment?
Should the company accept or reject this project?
Find the net present value break-even level of units sold. Round your answer to the nearest whole unit.
Managerial Accounting Tools for business decision making
ISBN: 978-1118096895
6th Edition
Authors: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso