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 rate of return of the investment based on average 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 rate of return of the investment based on average investment?
Chapter9: Capital Budgeting And Cash Flow Analysis
Section: Chapter Questions
Problem 5P
Related questions
Question
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 rate of
Expert Solution
![](/static/compass_v2/shared-icons/check-mark.png)
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps with 1 images
![Blurred answer](/static/compass_v2/solution-images/blurred-answer.jpg)
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you
![EBK CONTEMPORARY FINANCIAL MANAGEMENT](https://www.bartleby.com/isbn_cover_images/9781337514835/9781337514835_smallCoverImage.jpg)
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:
9781337514835
Author:
MOYER
Publisher:
CENGAGE LEARNING - CONSIGNMENT
Principles of Accounting Volume 2
Accounting
ISBN:
9781947172609
Author:
OpenStax
Publisher:
OpenStax College
![Cornerstones of Cost Management (Cornerstones Ser…](https://www.bartleby.com/isbn_cover_images/9781305970663/9781305970663_smallCoverImage.gif)
Cornerstones of Cost Management (Cornerstones Ser…
Accounting
ISBN:
9781305970663
Author:
Don R. Hansen, Maryanne M. Mowen
Publisher:
Cengage Learning
![EBK CONTEMPORARY FINANCIAL MANAGEMENT](https://www.bartleby.com/isbn_cover_images/9781337514835/9781337514835_smallCoverImage.jpg)
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:
9781337514835
Author:
MOYER
Publisher:
CENGAGE LEARNING - CONSIGNMENT
Principles of Accounting Volume 2
Accounting
ISBN:
9781947172609
Author:
OpenStax
Publisher:
OpenStax College
![Cornerstones of Cost Management (Cornerstones Ser…](https://www.bartleby.com/isbn_cover_images/9781305970663/9781305970663_smallCoverImage.gif)
Cornerstones of Cost Management (Cornerstones Ser…
Accounting
ISBN:
9781305970663
Author:
Don R. Hansen, Maryanne M. Mowen
Publisher:
Cengage Learning
![Managerial Accounting: The Cornerstone of Busines…](https://www.bartleby.com/isbn_cover_images/9781337115773/9781337115773_smallCoverImage.gif)
Managerial Accounting: The Cornerstone of Busines…
Accounting
ISBN:
9781337115773
Author:
Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:
Cengage Learning
![Managerial Accounting](https://www.bartleby.com/isbn_cover_images/9781337912020/9781337912020_smallCoverImage.jpg)
Managerial Accounting
Accounting
ISBN:
9781337912020
Author:
Carl Warren, Ph.d. Cma William B. Tayler
Publisher:
South-Western College Pub