Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

An olive oil factory requires a fixed capital investment of $3,000,000 and a working capital of $250,000. The average annual cost of production is $1,200,000

An olive oil factory requires a fixed capital investment of $3,000,000 and a working capital of $250,000. The average annual cost of production is $1,200,000 whereas the average annual income from sales is $2,000,000. The tax rate on profits is known to be 15% and the rate of interest is 10%. The expected lifetime of the equipment is 15 years and the annual rate of depreciation is 6% of the initial value.

a) Calculate the rate of return on investment. Comment on the investments feasibility.

b) Calculate the payout period by neglecting the time value of money. Comment on the investments feasibility.

c) Calculate the payout period by considering the time value of money. Comment on the investments feasibility.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Operational Auditing A Complete Guide

Authors: Gerardus Blokdyk

2019 Edition

0655515879, 978-0655515876

More Books

Students also viewed these Accounting questions

Question

Multiply or divide as indicated. 44.4788 5.27

Answered: 1 week ago