Chapter 25 Capital Investment Analysis 12289 Average annual Galactic love income. 5405,000 EX 25-3 Average rate of retum-new product is considering an investment in w smartphone. The phone is expected to generate ada unit. The equipment has a cost of $850,000, residus equipment can only be used to manufacture the phone. The cos Obj. 2 new equipment that will be used to manufacture a o ment that will be is expected to generate a n al anal sales of 6,000 units at $250 per al cost of $850,000, residual value of $50.000. and an eight-year life. The used to manufacture the phone. The cost to manufacture the phone follows SHOW ME Cost per unit Direct labor Direct materials Factory overhead including depreciation Total cost per unit Determine the average rate of return on the equipment $ 1500 13400 33.50 $12.50 1: S(168.500) ow! EX 25-4 Calculate cash flows Obj. 2 Nature's Way c. is planning to invest in new manufacturing equipment to make a new garden tool. The new garden tool is expected to generate garden tool is expected to generate additional annual sales of 2.500 units at $60 cach. The new manufacturing equipment will cost $27.00 and is expected to have a 10 year residual value. Selling expenses related to the new product are expected to be 5% of sales revenue. The cost to manufacture the includes the following on a per-unit basse W NEW W Direct labor $ 8.00 Direct materials 22.00 Fixed factory overhead depreciation 3.40 Variable factory overhead 3.60 Total $42.00 Determine the net cash flows for the first year of the project. Year 2-9, and for the last year of the project. 8. Location 1:4.5 years EX 25-5 Cash payback period for a service company Obj. 2 Chinook Industries Inc. is evaluating two capital investment proposals for a retail outlet, each requiring an investment of $900,000 and each with an eight-year life and expected total net cash flows of $1.000.000. Location 1 is expected to provide equal annual net cash flows of $200,000, and Location 2 is expected to have the following unequal annual net cash flows Years $50.000 Year 2 220,000 Year 6 50.000 Year 3 180.000 Year 7 30,000 Year 4 150.000 Year 20,000 SHEN WE HOW ol. 2 Determine the cash payback period for both location proposals ELCE, TEMPLATE Obj. 2 lirect - life. EX 25-6 Cash payback method Obj. 2 Tily Products Company is considering an investment in one of two new product line investment required for either product line is $10,000. The net cash flows associated with each product are as follows: Year Liquid Soap Body Lotion $170,000 $ 90,000 150,000 90,000 120.000 90.000 100.000 90 000 70.000 90.000 90,000 40.000 00.000 30.000 90.000 5720.000 5720.000 Total ar. In -line (Combined
