Blue Company, have developed a new cellular phone battery that high performance flash drive and forecasted figures are shown below: ~ Annual volume 30,000 units for the next four years ~ Selling price $1,000 ~ Unit variable costs $600 ~ Annual cash fixed costs $1,500,000 ~ Cost of required machinery $20,000,000 ~ Useful life 4 years, no salvage value ~ Increase in receivables $900,000 ~ Increase in inventory $100,000 The increase in working will be recovered in full at the end of four years. The company is in the 30% tax bracket and has a 15% cost of capital. - What is the approximate internal rate of return of the investment? - What is the payback period of the investment?
Blue Company, have developed a new cellular phone battery that high performance flash drive and forecasted figures are shown below: ~ Annual volume 30,000 units for the next four years ~ Selling price $1,000 ~ Unit variable costs $600 ~ Annual cash fixed costs $1,500,000 ~ Cost of required machinery $20,000,000 ~ Useful life 4 years, no salvage value ~ Increase in receivables $900,000 ~ Increase in inventory $100,000 The increase in working will be recovered in full at the end of four years. The company is in the 30% tax bracket and has a 15% cost of capital. - What is the approximate internal rate of return of the investment? - What is the payback period of the investment?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Blue Company, have developed a new cellular phone battery that high performance flash drive and
~ Annual volume 30,000 units for the next four years
~ Selling price $1,000
~ Unit variable costs $600
~ Annual cash fixed costs $1,500,000
~ Cost of required machinery $20,000,000
~ Useful life 4 years, no salvage value
~ Increase in receivables $900,000
~ Increase in inventory $100,000
The increase in working will be recovered in full at the end of four years. The company is in the 30% tax bracket and has a 15% cost of capital.
- What is the approximate internal rate of
- What is the payback period of the investment?
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