Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

please make anwser easy to read and understand, and show work. thank you! Gallatin, Inc., has provided the estimates shown below relating to a proposed

please make anwser easy to read and understand, and show work. thank you!
image text in transcribed
image text in transcribed
Gallatin, Inc., has provided the estimates shown below relating to a proposed new project with a 4-year project life. At the end of the 4 years, the equipment purchased for the project will be sold and working capital would revert back to the company to be used for other company needs. Annual cash sales Annual cash expenses Annual depreciation on new equipment Initial cost of new equipment Salvage value of new equipment in 4 years Working capital requirement $250,000 $130,000 $ 75,000 $300,000 $ 40,000 $ 15,900 1. Assuming Gallatin's discount rate is 12%, compute the net present value (NPV) of the project. To receive credit, present your work in a manner that demonstrates your understanding of the inflows and outflows (l.e. do not just provide an answer). 2. Is the Internal rate of return (IRR) on this project greater than or less than 12%? Why? (2 points) Compute the Simple Rate of Return on this project. Show your computations to receive credit. (3 points) Ignoring working capital, salvage value and depreciation, compute the payback period for this investment. Show your computations to receive credit. (2 points) Gallatin, Inc., has provided the estimates shown below relating to a proposed new project with a 4-year project life. At the end of the 4 years, the equipment purchased for the project will be sold and working capital would revert back to the company to be used for other company needs. Annual cash sales Annual cash expenses Annual depreciation on new equipment Initial cost of new equipment Salvage value of new equipment in 4 years Working capital requirement $250,000 $130,000 $ 75,000 $300,000 $ 40,000 $ 15,900 1. Assuming Gallatin's discount rate is 12%, compute the net present value (NPV) of the project. To receive credit, present your work in a manner that demonstrates your understanding of the inflows and outflows (i.e. do not just provide an answer). 2. Is the Internal rate of return (IRR) on this project greater than or less than 12%? Why? (2 points) 3 . Compute the Simple Rate of Return on this project. Show your computations to receive credit. (3 points) 4. Ignoring working capital, salvage value and depreciation, compute the payback period for this investment. Show your computations to receive credit. (2 points)

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

The International Corporate Governance System Audit Roles And Board Oversight

Authors: F. Lessambo

1st Edition

134947178X, 978-1349471782

More Books

Students also viewed these Accounting questions

Question

Draw a labelled diagram of the Dicot stem.

Answered: 1 week ago