Tatsumi Inc. has just completed development of a new printer. The new product is expected to produce
Question:
Tatsumi Inc. has just completed development of a new printer. The new product is expected to produce annual revenues of $4,050,000. Producing the printer requires an investment in new equipment costing $4,320,000. The printer has a projected life cycle of 5 years. After 5 years, the equipment can be sold for $540,000. Working capital is also expected to decrease by $540,000, which Tatsumi will recover by the end of the new product’s life cycle. Annual cash operating expenses are estimated at $2,430,000. The required rate of return is 8%.
Required:
1. Prepare a schedule of the projected annual cash flows.
2. Calculate the NPV using only discount factors from Exhibit 12B.1 (p. 680).
3. Calculate the NPV using discount factors from both Exhibits 12B.1 and 12B.2 (p. 681).
Exhibit 12B.1
Exhibits 12B.2
7% 10% 12% 14% 16% 18% 30% 20% 25% n/A 1% 2% 4% 1 0.99010 0.98039 0.97087 0.96154 0.95238 0.94340 0.93458 0.92593 0.91743 0.90909 0.89286 0.87719 0.86207 0.84746 0.83333 0.80000 0.76923 2 0.98030 0.96117 0.94260 0.92456 0.90703 0.89000 0.87344 0.85734 0.84168 0.82645 0.79719 0.76947 0.74316 0.71818 0.69444 0.64000 0.59172 3 0.97059 0.94232 0.91514 0.88900 0.86384 0.83962 0.81630 0.79383 0.77218 0.75131 0.71178 0.67497 0.64066 0.60863 0.57870 0.51200 0.45517 4 0.96098 0.92385 0.88849 0.85480 0.82270 0.79209 0.76290 0.73503 0.70843 0.68301 0.63552 0.59208 0.55229 0.51579 0.48225 0.40960 0.35013 5 0.95147 0.90573 0.86261 0.82193 0.78353 0.74726 0.71299 0.68058 0.64993 0.62092 0.56743 0.51937 0.47611 0.43711 0.40188 0.32768 0.26933 6 0.94205 0.88797 0.83748 0.79031 0.74622 0.70496 0.66634 0.63017 0.59627 0.56447 0.50663 0.45559 0.41044 0.37043 0.33490 0.26214 0.20718 7 0.93272 0.87056 0.81309 0.75992 0.71068 0.66506 0.62275 0.58349 0.54703 0.51316 0.45235 0.39964 0.35383 0.31393 0.27908 0.20972 0.15937 8 0.92348 0.85349 0.78941 0.73069 0.67684 0.62741 0.58201 0.54027 0.50187 0.46651 0.40388 0.35056 0.30503 0.26604 0.23257 0.16777 0.12259 9 0.91434 0.83676 0.76642 0.70259 0.64461 0.59190 0.54393 0.50025 0.46043 0.42410 0.36061 0.30751 0.26295 0.22546 0.19381 0.13422 0.09430 10 0.90529 0.82035 0.74409 0.67556 0.61391 0.55839 0.50835 0.46319 0.42241 0.38554 0.32197 0.26974 0.22668 0.19106 0.16151 0.10737 0.07254 11 0.89632 0.80426 0.72242 0.64958 0.58468 0.52679 0.47509 0.42888 0.38753 0.35049 0.28748 0.23662 0.19542 0.16192 0.13459 0.08590 0.05580 12 0.88745 0.78849 0.70138 0.62460 0.55684 0.49697 0.44401 0.39711 0.35553 0.31863 0.25668 0.20756 0.16846 0.13722 0.11216 0.06872 0.04292 13 0.87866 0.77303 0.68095 0.60057 0.53032 0.46884 0.41496 0.36770 0.32618 0.28966 0.22917 0.18207 0.14523 0.11629 0.09346 0.05498 0.03302 14 0.86996 0.75788 0.66112 0.57748 0.50507 0.44230 0.38782 0.34046 0.29925 0.26333 0.20462 0.15971 0.12520 0.09855 0.07789 0.04398 0.02540 15 0.86135 0.74301 0.64186 0.55526 0.48102 0.41727 0.36245 0.31524 0.27454 0.23939 0.18270 0.14010 0.10793 0.08352 0.06491 0.03518 0.01954 16 0.85282 0.72845 0.62317 0.53391 0.45811 0.39365 0.33873 0.29189 0.25187 0.21763 0.16312 0.12289 0.09304 0.07078 0.05409 0.02815 0.01503 17 0.84438 0.71416 0.60502 0.51337 0.43630 0.37136 0.31657 0.27027 0.23107 0.19784 0.14564 0.10780 0.08021 0.05998 0.04507 0.02252 0.01156 18 0.83602 0.70016 0.58739 0.49363 0.41552 0.35034 0.29586 0.25025 0.21199 0.17986 0.13004 0.09456 0.06914 0.05083 0.03756 0.01801 0.00889 19 0.82774 0.68643 0.57029 0.47464 0.39573 0.33051 0.27651 0.23171 0.19449 0.16351 0.11611 0.08295 0.05139 0.04308 0.03130 0.01441 0.00684 20 0.81954 0.67297 0.55368 0.45639 0.37689 0.31180 0.25842 0.21455 0.17843 0.14864 0.10367 0.07276 0.05139 0.03651 0.02608 0.01153 0.00526 21 0.81143 0.65978 0.53755 0.43883 0.35894 0.29416 0.24151 0.19866 0.16370 0.13513 0.09256 0.06383 0.04430 0.03094 0.02174 0.00922 0.00405 22 0.80340 0.64684 0.52189 0.42196 0.34185 0.27751 0.22571 0.18394 0.15018 0.12285 0.08264 0.05599 0.03819 0.02622 0.01811 0.00738 0.00311 23 0.79544 0.63416 0.50669 0.40573 0.32557 0.26180 0.21095 0.17032 0.13778 0.11168 0.07379 0.04911 0.03292 0.02222 0.01509 0.00590 0.00239 24 0.78757 0.62172 0.49193 0.39012 0.31007 0.24698 0.19715 0.15770 0.12640 0.10153 0.06588 0.04308 0.02838 0.01883 0.01258 0.00472 0.00184 25 0.77977 0.60953 0.47761 0.37512 0.29530 0.23300 0.18425 0.14602 0.11597 0.09230 0.05882 0.03779 0.02447 0.01596 0.01048 0.00378 0.00142 26 0.77205 0.59758 0.46369 0.36069 0.28124 0.21981 0.17220 0.13520 0.10639 0.08391 0.05252 0.03315 0.02109 0.01352 0.00874 0.00302 0.00109 27 0.76440 0.58586 0.45019 0.34682 0.26785 0.20737 0.16093 0.12519 0.09761 0.07628 0.04689 0.02908 0.01818 0.01146 0.00728 0.00242 0.00084 28 0.75684 0.57437 0.43708 0.33348 0.25509 0.19563 0.15040 0.11591 0.08955 0.06934 0.04187 0.02551 0.01567 0.00971 0.00607 0.00193 0.00065 29 0.74934 0.56311 0.42435 0.32065 0.24295 0.18456 0.14056 0.10733 0.08215 0.06304 0.03738 0.02237 0.01351 0.00823 0.00506 0.00155 0.00050 30 0.74192 0.55207 0.41199 0.30832 0.23138 0.17411 0.13137 0.09938 0.07537 0.05731 0.03338 0.01963 0.01165 0.00697 0.00421 0.00124 0.00038 * P% = A/(1 + i)º 3% 5% 6% 8% 9%
Step by Step Answer:
1 2 Calculation of NPV 3 Calculation of NPV Year 0 14 5 Ite...View the full answer
Managerial Accounting The Cornerstone Of Business Decision Making
ISBN: 9780357715345
8th Edition
Authors: Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Students also viewed these Business questions
-
Talmage Inc. has just completed development of a new printer. The new product is expected to produce annual revenues of $2,700,000. Producing the printer requires an investment in new equipment...
-
Snow Inc. has just completed development of a new cell phone. The new product is expected to produce annual revenues of $1,400,000. Producing the cell phone requires an investment in new equipment,...
-
Oaks, Inc., has just completed development of a new cell phone. The new product is expected to produce annual revenues of $450,000. To produce the cell phone, an investment requires an investment in...
-
WSU Small Business Booster Every year, Robin identifies a small business to invest her money in because she wants to support companies that WSU students have started. Robin named the program WSU...
-
A sports goods manufacturer makes baseball and hockey gloves. Suppose now is the end of December and the manager wishes to plan production for the next three quarters. The forecast demand for...
-
A periodic force \(F(t)=A \cos \omega t\) is applied to the damped system shown in Figure 3.53. Calculate the work done in one cycle during the steady-state response where \(A=50 \mathrm{~N},...
-
Airhead Oil Companys balance sheet includes three assets: Natural Gas, Oil, and Coal. Suppose Airhead Oil Company paid $1,900,000 cash for the right to work a mine with an estimated 200,000 tons of...
-
Jones Group has been generating stable after-tax return on equity (ROE) despite declining operating income. Explain how it might be able to maintain its stable after-tax ROE.
-
Suppose that you have taken a short position on a call option. The strike price if $55, and the option premium / price is $5.When the option expires, the value of the underlying asset is $54. What is...
-
GMC wants to decide whether to retool the Lyra and Libra plants. In addition, GMC wants to determine its production plan at each plant in the coming year. Based on the previous data, formulate a MILP...
-
Each of the following scenarios is independent. Assume that all cash flows are after-tax cash flows. a. Campbell Manufacturing is considering the purchase of a new welding system. The cash benefits...
-
What are two key components of data analytics for capital investment decision making?
-
A single-step income statement appears below. Present the information in a multistep income statement, and indicate what insights can be obtained from the multistep form as opposed to the...
-
You have estimated that your current computer is going to last one more year. Then you will need to buy a new computer. You have some cash now but it does not make sense to buy a computer if you do...
-
Wagner plc is considering a project which will generate cash flows of 5 , 0 0 0 each year from years 3 to 7 . The company has a cost of capital of 1 4 % . What is the total present value of the cash...
-
Calculate the current-period financial statement items expressed as a percentage of the base amount for the last two years. In other words, use this relationship: Common-Size Percentage = (comparison...
-
You have an annual gross income of $125,000. Using the 33/38 rule for maximum mortgage payment (PITI) estimation, what is your maximum PITI payment using your monthly gross income as a guide (33%)?
-
Explain if Coca Cola has formed any strategic alliances, and if so, how the strategic alliance leads to competitive advantage. If Coca Cola does not have any strategic alliance, identify a potential...
-
Tropica AB processes tropical fruit into fruit salad mix, which it sells to a food-service company. Tropica has in its budget the following standards for the direct materials inputs to produce 80 kg...
-
Consider a game of poker being played with a standard 52-card deck (four suits, each of which has 13 different denominations of cards). At a certain point in the game, six cards have been exposed. Of...
-
Each of the following scenarios is independent. Assume that all cash ows are after-tax cash a. Cobre Company is considering the purchase of new equipment that will speed up the processfor extracting...
-
Spiro Hospital is investigating the possibility of investing in new dialysis equipment. Two localmanufacturers of this equipment are being considered as sources of the equipment. After-taxcash inows...
-
Eyring Company invested $7,500,000 in a new product line. The life cycle of the product is projected to be 7 years with the following net income stream: $300,000, $300,000, $500,000, $900,000,...
-
How did railroads change America? Industrialization and Technological Innovation ? Discuss one positive and one negative consequence of American industrialization
-
1. As part of your co-op placement, you work for a construction company. The boss knows you work fast on computers and asks you to enter all the client information in the database. That evening at...
-
Why can we say that technological innovation was just as significant in building American cities as it was in driving American industrialization? In what ways did the Civil War help American...
Study smarter with the SolutionInn App