please answer all parts and 1
Search AutoSave OD R 2 Filo Home Insert Wey. Mgrl_70_ET_CH12 (1) - Excel Formulas Data Review View Help Page Layout DYMO Label QuickBooks T14 X fo 4 A B C D E F G H I J K L M N 1 CD12 Current Designs 2 A company that manufactures recreational pedal boats has approached Mike Cichanowski to ask if he would be interested 3 in using Current Designs' rotomold expertise and equipment to produce some of the pedal boat components. Mke is intrigued 4 by the idea and thinks it would be an interesting way of complementing the present product line. 5 One of Mike's hesitations about the proposal is that the pedal boats are a different shape than the kayaks that Current 6 Designs produces. As a result, the company would need to buy an additional rotomold oven in order to produce the pedal boat 7 components. This project clearly involves risks, and Mike wants to make sure that the returns justify the risks. In this case, sino 8 this is a new venture, Mike thinks that a 15% discount rate is appropriate to evaluate the project. 9 As an intern at Current Designs, Mike has asked you to prepare an initial evaluation of this proposal. To aid in your analysis, 10 he has provided the following information and assumptions, 11 1. The new rotomold oven will have a cost of $256,000, a salvage value of $0, and an 8-year useful life. 12 Straight-line depreciation will be used. 32. The projected revenues, costs, and results for each of the 8 years of this project are as follows. 14 Sales $220,000 Less Manufacturing costs Depreciation 32,000 Shipping and administrative costs 22,000 194,000 Income before income taxes $26,000 Income tax expense 10,800 Net income $15,200 3 Instructions -4 (a) Compute the annual rate of return. (Round to two decimal places.) 5(b) Compute the payback period. (Round to two decimal places.) 6 (0) Compute the NPV using a discount rate of 9%. (Round to nearest dollar.) 7 Should the proposal be accepted using this discount rate? 8 (d) Compute the NPV using a discount rate of 15%. (Round to nearest dollar), 9 Should the proposal be accepted using this discount rate? NOTE: Enter a number in cells requesting a value; enter either a number or a formula in cells with a "?". I A B C D E F G H 34 (a) Compute the annual rate of return. (Round to two decimal places.) Net income Average investment Annual rate of return Value Value 41 (b) Compute the payback period. (Round to two decimal places.) Net income Depreciation Net annual cash flow Value Value Cost of investment Net annual cash flow Payback period in years Value Value 52 (c) Compute the NPV using a discount rate of 9%. (Round to nearest dollar.) Should the proposal be accepted using this discount rate? Time Period 1-8 Event Net annual cash flow Less: Oven purchase Net present value Cash Flows Value Value 9% Discount Present Factor Value 5.53482 2 1.00000 Response: E12- 2 012.4 P12-1A P12-4A CD12 ExtraCredit - Type here to searchO W @elem Cro Page Layout Wey.Mgrl_7e_ET_Ch12 (1) - Excel Search Formulas Data Review View HelpDYMO Label QuickBooks AutoSave OH File Home Insert T14 - 1x 4 A B C fe D E si Time Period 1-8 Event Net annual cash flow Less: Oven purchase Net present value Cash Flows Value Value 9% Discount Present Factor Value 5.53482 1.00000 Response: OSOS 65 (d) Compute the NPV using a discount rate of 15%. (Round to nearest dollar) Should the proposal be accepted using this discount rate? 66 67 Time Period 1-8 Cash Flows Value Value Event Net annual cash flow Less: Oven purchase Net present value 15% Discount Factor 4.48732 1.00000 Present Value ? Response: 80 1. Assume that the initial cost of the oven and the salvage value changed to $260,000 and 81 $5,000 respectively. Also assume that net Income changed to $14,700. What impact do 82 these changes have on your calculations
