Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Please help me out thank you Pappy's Potato has come up with a new product, the Potato Pet (they are freeze-drled to last longer). After

Please help me out thank you image text in transcribed

Pappy's Potato has come up with a new product, the Potato Pet (they are freeze-drled to last longer). After a careful marketing survey, It estimates that Potato Pet will generate sales of $840,000 per year. The fixed costs assoclated with thls will be $206,000 per year, and varlable costs will amount to 18 percent of sales. The equipment necessary for the production of the Potato Pet will cost $860,000 and will be depreclated In a stralght-llne manner for the four years of the product life (as with all fads, it is felt the sales will end quickly because of intensive compettion). This is the only Inttal cost for the production. Pappy's has a tax rate of 21 percent and a required return of 13 percent Prepare the Pro Forma FInanclal Statement about the project (namely, the annual earnings). You only need to calculate for the first year, the other three years will be the same. (3') t. Calculate the TIme 0 cash flow for this project (I.e., what Is the Initlal Investment for the Potato Pet project). (1') Note: A negatlve answer should be Indlcated by a minus sign. Do not round Intermedlate calculations and round your answer to the nearest whole number, e.g., 32 . Calculate the annual free cash flow for this project (There is no net working capital and salvage value for this project). (4') Note: Do not round Intermedlate calculatlons and round your answer to the nearest whole number, e.g., 32 . Calculate the payback perlod for this project. (1') Note: Do not round Intermedlate calculations and round your answer to 2 decimal places, e.g., 32.16. Calculate the NPV for this project. (1') Note: Do not round Intermedlate calculatlons and round your answer to 2 decimal places, e.g., 32.16 . Calculate the IRR for this project. (1') Note: Do not round Intermedlate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16

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

Deciding What To Teach And Test Developing Aligning And Auditing The Curriculum

Authors: Fenwick W. English

1st Edition

0803968329, 978-0803968325

More Books

Students also viewed these Accounting questions