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Would you recommend the acceptance of this proposal ? Why or why not ? Course Project 2 Instructions (Read-Only) Microsoft Word non-commercial References Mailings Review
Would you recommend the acceptance of this proposal ? Why or why not ? Course Project 2 Instructions (Read-Only) Microsoft Word non-commercial References Mailings Review View all : 13x. , Emphasis Heading 1 tNormalJ strong . Subtitle Title ' x, x. Aa-9-A EE Paragraph Styles Hampton Company is a producer of house paints. The company'sproduction department has been investigating possible ways to trim total production costs. One possibility currently being examined is to make the paintcans instead of purchasing them. The equipmentneededwould cost$1,000,000, with a disposal value of $200,000, and would be able to produce 27,500,000 cans overthe life of the machinery. The production department estimates that approximately 5,500,000 cans would be neededforeach of the next 5 years. The company would hire six new employees to produce the paintcans. These six individuals would be full-time employees working 2,000 hours per yearand eaning $15.00 perhour. They would also receive the same benefits as other production employees. 1 5% of wages in addition to $2,000 of health benefits It is estimated thatthe raw materials will cost 30p per can and that other variable costs would be would be incurred if this proposal is accepted. It is expected thatcans would cost 50p each if purchased from the current supplier. The projec 10c percan. Because there is currently unused space in the factory, no additional fixed costs company's minimum rate of return (hurdle rate) has been determined to be 1 1 % for all new cts, and the current tax rate of 35% is anticipated to remain unchanged. The pricing for the company's products as well as number of units sold will not be affected by this decision. The unit- of-production depreciation method would be used if the new equipment is purchased. Required: 1-Based on the abovenformation and usina Excel.calculate the followina items for this Required: 1. Based on the above information and using Excel, calculate the following items for this proposed equipmentpurchase o Annualcash flows over the expected life of the equipment o Payback period o Simple rate of return o Netpresent value o Internal rate of return The check figure for the total annual after-taxcash flows is $271,150 2734 000 szLe
Would you recommend the acceptance of this proposal ? Why or why not ?
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