Coronado Skateboards is considering building a new plant. David Al-Saigh, the company's marketing manager, is an enthusiasticsupporter of the new plant. Jennifer Miller, the company's chief financial officer, is not so sure that the plant is a good idea. Currently,the company purchases its skateboards from foreign manufacturers. The following figures were estimated for the construction of anew plant:Cost of plantAnnual cash inflowsAnnual cash outflowsEstimated useful lifeSalvage valueDiscount rate$6,360,000$6,360,000$5,883,00015 years$1,060,000David believes that these figures understate the true potential value of the plant. He suggests that by manufacturing its ownskateboards the company will benefit from a "buy Canadian" patriotism. He also notes that the firm has had numerous qualityproblems with the skateboards manufactured by its suppliers. He suggests that the inconsistent quality has resulted in lost sales,increased warranty claims, and some costly lawsuits. Overall, he believes sales will be $265,000 higher each year than projectedabove, and that the savings from lower warranty costs and legal costs will be $106,000 per year. He also believes that the project is notas risky as assumed above, and that a 6% discount rate is more reasonable.Show Transcribed TextNet present value $8%Calculate the project's net present value based on the original projections. (For calculation purposes, use 5 decimal places asdisplayed in the factor table provided, e.g. 1.25124. If the net present value is negative, use either a negative sign preceding the number e.g.-45 or parentheses e.g. (45). Round final answer to 0 decimal places, e.g. 5,275.)It should beDetermine whether it should be accepted or not.

Net Present value : > Net present Value as the name suggests is the present value of all the cash…

Calculate the project's net present value based on the original projections. (For calculation purposes, use 5 decimal places as displayed in the factor table provided, e.g. 1.25124. If the net present value is negative, use either a negative sign preceding the number e.g. -45 or parentheses e.g. (45). Round final answer to O decimal places, e.g. 5,275.) Net present value Determine whether it should be accepted or not. It should be

Calculate the project's net present value based on the original projections. (For calculation purposes, use 5 decimal places as displayed in the factor table provided, e.g. 1.25124. If the net present value is negative, use either a negative sign preceding the number e.g. -45 or parentheses e.g. (45). Round final answer to O decimal places, e.g. 5,275.) Net present value Determine whether it should be accepted or not. It should be

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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