ACCOUNTING $2302\mathrm{.}021$

Final Project

The Final Project has two parts: $1)$ Capital Investment Analysis $(50$ points$)$; $2)$ Financial Statement Analysis. $(50$ points$).$ The project is worth a total on $100$ points.

Part $1)$ Eagle Manufacturing Company is planning to add a new product to their production process. The company will need to buy a new piece of equipment at a cost of $$480,000$ with a four $-$year expected life and a $$20,000$ salvage value. The company uses the Straight$-$line method of depreciation. Additional information is as follows:

Expected annual sales of new product $q,$ $$1,840,000$

Expected increase in annual costs:

$\backslash$table$[[$irect Materials...,$480,000],[$irect $La,672,000],[$verhead $($Excluding Depreciation$).......,336,000],[$Administration expenses.,$160,00],[$x Expense.............,$]]$

a$)$ Calculate the Accounting Rate$-$of$-$Return

b$)$ Calculate the Net Present Value of the new equipment assuming a discount rate of $8\%.$