Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

An urban cooperative in Austin that supplies leafy greens and herbs to local restaurants and grocery stores is looking to expand their operation. The co-op

An urban cooperative in Austin that supplies leafy greens and herbs to local restaurants and grocery stores is looking to expand their operation. The co-op would like to build an aquaponic system to increase their production of greens and also start producing tilapia. The new system would cost $28,000 to purchase and construct. The co-op projects that it will yield $240 of tilapia and $600 of leafy greens every week. Operating expenses are expected to increase by $15,200 annually due to fish nutrients, utilities, maintenance, and additional labor. Suppose that the workers wanted to evaluate this investment over a five-year period of time before committing. They expect that the components could be sold for $5,500 after five years of use. Taxes are expected to stay at 20% for the next six years. The IRS will allow the co-op to depreciate the system using straight line over 15 years. Assume that the terminal value of this investment is $5,500 at the end of five years. The co-op requires an 16% return to capital (pretax). (

i) Calculate the annual operating receipts a. $28,480 b. $15,200 c. $43,680 d. $43,860 ENTER RESPONSE HERE:

(ii) Calculate the after tax- net returns a. $22,928 b. $28,480 c. $28,660 d. $22,784 ENTER RESPONSE HERE:

(iii) Calculate the tax savings from depreciation a. $1,866 b. $2,333 c. $373 d. $299 ENTER RESPONSE HERE:

(iv) Calculate the after-tax terminal value a. $14,000 b. $8,133 c. $4,400 d. $5,500 ENTER RESPONSE HERE:

(v) Which discount rate should be used for calculating the NPV of this investment? a. 12.8% b. 16.8% c. 3.2% d. 4% ENTER RESPONSE HERE:

(vi) What is the NPV? a. $51,696 b. $58,302 c. $80,529 d. $51,669 ENTER RESPONSE HERE:

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

Management Control Systems Performance Measurement Evaluation And Incentives

Authors: Kenneth Merchant, Wim Van Der Stede

4th Edition

1292110554, 978-1292110554

More Books

Students also viewed these Accounting questions

Question

3 What are the stages of Kotter and Cohens model of change?

Answered: 1 week ago

Question

4 What is organisation development?

Answered: 1 week ago

Question

5 What activities are employed in OD processes?

Answered: 1 week ago