MANAGERIAL ACCOUNTING HANDOUT PROBLEM 12 Score Name Section Problem (10 points). Borodin Glassworks is considering adding a new product line of glass Christmas omaments. In order to add the product line, the following investment would be required. BORODIN GLASSWORKS ADDITIONAL INVESTMENT REQUIRED FOR NEW PRODUCT LINE Production equipment S 300,000 Sales displays 100,000 Total S 400,000 The production equipment and sales displays would have an expected life of ten years. All equipment and displays would be depreciated over a ten year life using straight line depreciation with no salvage value. At the end of ten years, it is expected that all equipment and displays could be sold for $10,000. Attached are the expected operating cash receipts and cash expenses by year for the proposed product line. The company's tax rate is 30 percent and its after tax cost of capital is 8 percent. The company would like its investment to be paid back in seven years or less. REQUIRED: (1) Compute the after tax accounting rate of return for the proposed investment. Round your answer to four decimal places. Compute the after tax payback for the proposed investment. Round your answer to two decimal places. Compute the after tax net present value for the proposed investment. Round your answer to the nearest whole dollar. Should the company make the proposed investment? Explain. BORODIN GLASSWORKS CAPITAL BUDGETING DATA FOR INVESTMENT PROJECT Year Cash Revenues Cash Expenses 40,000 90,000 110,000 120,000 150,000 170,000 170,000 170,000 170,000 170,000 50,000 50,000 55,000 65,000 70,000 75,000 75,000 75,000 75,000 75,000 10