Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Pappy's Potato has come up with a new product, the Potato Pet (they are freeze-dried to last longer). Pappy's paid $165,000 for a marketing survey

image text in transcribedimage text in transcribed

Pappy's Potato has come up with a new product, the Potato Pet (they are freeze-dried to last longer). Pappy's paid $165,000 for a marketing survey to determine the viability of the product. It is felt that Potato Pet will generate sales of $880,000 per year. The fixed costs associated with this will be $222,000 per year, and variable costs will amount to 18 percent of sales. The equipment necessary for production of the Potato Pet will cost $940,000 and will be depreciated in a straight-line manner for the four years of the product life (as with all fads, it is felt the sales will end quickly). This is the only initial cost for the production. Pappy's has a tax rate of 24 percent and a required return of 13 percent. Calculate the Time 0 cash flow for this project. (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) Time 0 cash flow Calculate the annual OCF for this project. (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) OCF Calculate the payback period for this project. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Payback period years Calculate the NPV for this project. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) NPV Calculate the IRR for this project. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) IRR %

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

Financial And Managerial Accounting

Authors: Nonso E Okpala

1st Edition

1634873904, 9781634873901

More Books

Students also viewed these Finance questions

Question

How do open feedwater heaters differ from closed feedwater heaters?

Answered: 1 week ago

Question

what wll display on the console after it executes

Answered: 1 week ago

Question

Understand the reasons for engaging consultants

Answered: 1 week ago