Johnsonville Sausage Company is a profitable, tax-paying-company.Management is looking at a new bratwurst stuffing system with an installed cost of $300,000.This cost will be fully depreciated straight line over the five-year economic life of the system for tax purposes.Despite full depreciation, the salvage value of the system will be $60,000 at the end of its economic life.The new stuffer will add firm $100,000 per year in gross profit (= revenue - cost of goods sold).The system requires an initial inventory investment of $20,000 to operate, recoverable at the end of the projects life.The income tax rate is 40 percent for both ordinary and capital gains or losses.<\/p>
<\/p>
a)What are the after-tax cash flows associated for each relevant period?<\/p>
<\/p>
PERIOD 0 1 2 3 4 5<\/p>
Gross profit<\/p>
Depreciation<\/p>
EBIT<\/p>
Tax on Operating Profits<\/p>
NOPAT<\/p>
Depreciation<\/p>
OCF<\/p>
Initial Investment<\/p>
OCF<\/p>
Initial Investment<\/p>
Net Salvage Value<\/p>
CFD Due to Change in NWC<\/p>
FCF<\/p>
Cumulative FCF <\/p>
<\/p>
<\/p>
b)If the appropriate discount rate is 10%, what is the NPV of this project<\/p>
<\/p>
<\/p>
c)What is the IRR of the project<\/p>
<\/p>
<\/p>
d)Calculate the payback period for this project.<\/p>
<\/p>
<\/p>
e)Draw the NPV Diagram for the project<\/p>
<\/p>
<\/p>
f) Should the management accept this project?<\/p>", "transcribed_text": "", "related_book": { "title": "Accounting for Decision Making and Control", "isbn": "78025745, 978-0078025747", "edition": "8th edition", "authors": "Jerold Zimmerman", "cover_image": "https:\/\/dsd5zvtm8ll6.cloudfront.net\/si.question.images\/book_images\/364.jpg", "uri": "\/textbooks\/accounting-for-decision-making-and-control-8th-edition-364", "see_more_uri": "" }, "free_related_book": { "isbn": "3030588106", "uri": "\/textbooks\/computational-science-and-its-applications-iccsa-2020-20th-international-conference-cagliari-italy-july-1-4-2020-proceedings-part-iv-1st-edition-978-3030588106-326610", "name": "Computational Science And Its Applications Iccsa 2020 20th International Conference Cagliari Italy July 1 4 2020 Proceedings Part Iv", "edition": "1st Edition" }, "question_posted": "2024-06-06 06:07:51", "see_more_questions_link": "\/study-help\/questions\/business-human-resource-management-2020-May-22", "step_by_step_answer": "The Answer is in the image, click to view ...", "students_also_viewed": [ { "url": "\/look-up-the-most-recent-sustainability-report-of-the-united", "description": "Look up the most recent sustainability report of the United Parcel Services (UPS) and analyze if the companys social and environmental activities support the strategic market position chosen.", "stars": 3 }, { "url": "\/study-help\/management-accounting-4th-edition\/write-a-list-of-key-points-to-be-made-in-1276359", "description": "Write a list of key points to be made in a recommendation to the board of directors on the implementation of an expenditure control process for capital investment plans.", "stars": 3 }, { "url": "\/study-help\/introduction-to-probability-statistics\/the-arrival-of-airplanes-at-an-airport-can-be-modeled-1983307", "description": "The arrival of airplanes at an airport can be modeled by a Poisson process with a rate ???? = 5 arrivals per hour. 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