Problem (10 points) Virginia Glassworks as considering adding a new product. The new product line would of glass Christensaments and would require the attached invec The production and marketing equipment, as well as the displays would be an expected life often years. All equipment and displays would be deprecated over the year life wsing the 200% declining balance method with no salvage Value sed. At the end of the ten years, it is expected that the equipment and displays could be sold for a total of 10.000. In addition, the working capital will be returned at the end of the ten years. Attached are the expected opening cash resenoes and cash expenses by year for the proposed product line The company's tax rate is 35 percent and its cost of capital is 18 percent Management expects all investments to pay back their initial investment within seven years REQUIRED: (1) Compute the net present value (NPV) for the proposed investment on an after tax basis. Round all calculations to the cat whole dollar Compute the cash payback period in the propediement on anallertax basis. Round your answer to two decimal places Should the investment be made in your VIRGINIA GLASSWORNS ESTIMATED COST OF CAPITAL INVESTMENT Production equipment Working capital inot a depreciable) Marketing equipment and displays Totalvestment $ 200.000 100.000 50,000 350.000 VIRGINIA GLASSWORKS ESTIMATED ANNUAL CASH FLOWS FROM CAPITAL INVESTMENT PROJECT Year Cash Reve Cash Expenses 1 5 40.000 $ 50.000 50.000 3 100.000 55.000 4 65.000 5 150.000 20.000 6 throach 10 per year 75.000 Problem (10 points) Virginia Glassworks as considering adding a new product. The new product line would of glass Christensaments and would require the attached invec The production and marketing equipment, as well as the displays would be an expected life often years. All equipment and displays would be deprecated over the year life wsing the 200% declining balance method with no salvage Value sed. At the end of the ten years, it is expected that the equipment and displays could be sold for a total of 10.000. In addition, the working capital will be returned at the end of the ten years. Attached are the expected opening cash resenoes and cash expenses by year for the proposed product line The company's tax rate is 35 percent and its cost of capital is 18 percent Management expects all investments to pay back their initial investment within seven years REQUIRED: (1) Compute the net present value (NPV) for the proposed investment on an after tax basis. Round all calculations to the cat whole dollar Compute the cash payback period in the propediement on anallertax basis. Round your answer to two decimal places Should the investment be made in your VIRGINIA GLASSWORNS ESTIMATED COST OF CAPITAL INVESTMENT Production equipment Working capital inot a depreciable) Marketing equipment and displays Totalvestment $ 200.000 100.000 50,000 350.000 VIRGINIA GLASSWORKS ESTIMATED ANNUAL CASH FLOWS FROM CAPITAL INVESTMENT PROJECT Year Cash Reve Cash Expenses 1 5 40.000 $ 50.000 50.000 3 100.000 55.000 4 65.000 5 150.000 20.000 6 throach 10 per year 75.000
