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please specify how to fill in the exact table Because of the risk level involved in taking on a new product, management is trying to
please specify how to fill in the exact table
Because of the risk level involved in taking on a new product, management is trying to determine whether the returns will justify the risk. Members of management are evaluating the project and have determined a 13% discount rate is appropriate for evaluation purposes. To aid management in their decision-making process, your supervisor has asked you to prepare an analysis of the project giving the following information and assumptions: 1) The new equipment will have a cost of $345,000, a salvage value of $15,000 and a 6-year useful life. Straight line depreciation will 2) The projected revenues, costs, and results for each of the 6 years of this project are as follows: $352,000 Sales Less: Manufacturing costs Depreciation Shipping costs Administrative costs Income before income taxes Income tax expense Net income $207,000 55,000 14,000 15,200 291,200 60,800 24,320 $36,480 Instructions: Using the template below, a) compute the annual rate of return b) compute the payback period. c) compute the NPV using the determined 13% discount rate, Is this proposal acceptable using this discount rate? d) compute the NPV using a 16% discount rate so that Management has a comparison for analysis. Is this proposal acceptable using this discount rate? c) Present value of cash inflows: O Rate NPER PMT FV PV 2 Present value of cash outflows: 1 1 Net present value 2 2 Is this proposal acceptable using this discount rate? Respond Yes or No. d) Compute the NPV using the discount rate of 16% and the PV Excel formula where required. You should list out your inputs in the provided spaces. Present value of cash inflows: 2 Present value of cash outflows: Net present value Is this proposal acceptable using this discount rate? Respond Yes or Yes N Step by Step Solution
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