Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Company is considering Introducing a new fad boy, Topico. The new product is expected to generate annual revenue of $523,000, with direct materials cost of

image text in transcribed

Company is considering Introducing a new fad boy, Topico. The new product is expected to generate annual revenue of $523,000, with direct materials cost of $183,000, direct labour S156,000, and overhead cost of $105,000. In order to produce Topico, Company will need to purchase new equipment costing $299,000. The equipment will be used for 5 years, as Company expects that interest in the toy will be stopped by then. The equipment will have no residual value after 5 years. To insure a smooth operation, Company expects that the project will increase working capital by $6,000 at the beginning, which will be recovered at the end of the five years. In addition, it will cost Company $6,000 to remove the equipment and clean up the facility. Company's policy is to accept investment projects that have a 3-year payback period. Company's required rate of return is 9%. Your answer is correct. What is the payback period for this investment? (Round answer to 2 decimal places, e.g. 1.25.) Payback Period 10.94 years Your answer is correct. What is the net present value for this investment? (Round entry to 2 decimal places, e.g. 5,275.64. Show a negative amount preceded by a minus signe.g. -5,000.68 or (5,000.68). Use Time Value of Money Table values to 4 decimals, e.g. 0.5823.) Net present value S4423.3 Your answer is correct. What is the internal rate of return for this investment? (Round answer to 4 decimal places, e.g. 1.2564%.) Internal rate of return 3.5437) x Your answer is incorrect. Try again. What is the accrual accounting rate of return? (Round answer to 2 decimal places, e.g. 1.25%.) Accrual Accounting Rate of Return 12.04

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

Sound Investing, Chapter 10 - One-Time Charges And Other Format Fakes

Authors: Kate Mooney

2nd Edition

0071719326, 9780071719322

More Books

Students also viewed these Accounting questions