Quillen Company is performing a post-audit of a project completed one year ago. The initial estimates were that the project would cost$217,000, would have a useful life of 9 years, zero salvage value, and would result in net annual cash flows of $43,300 per year. Nowthat the investment has been in operation for 1 year, revised figures indicate that it actually cost $226,000, will have a total useful lifeof 11 years (including the year just completed), and will produce net annual cash flows of $37,100 per year. Click here to view PV table.Evaluate the success of the project. Assume a discount rate of 12%. (If the net present value is negative, use either a negative sign precedingthe number eg -45 or parentheses eg (45). Round present value answers to O decimal places, e.g. 125. For calculation purposes, use 5 decimalplaces as displayed in the factor table provided.)Original estimate net present valueRevised estimate net present value $The project$a success.

Net Present Value :— It Means the summation of all present Value of cash flows. For decision…

Evaluate the success of the project. Assume a discount rate of 12%. (If the net present value is negative, use either a negative sign preceding the number eg -45 or parentheses eg (45). Round present value answers to O decimal places, e.g. 125. For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Original estimate net present value Revised estimate net present value The project a success. $ $

Evaluate the success of the project. Assume a discount rate of 12%. (If the net present value is negative, use either a negative sign preceding the number eg -45 or parentheses eg (45). Round present value answers to O decimal places, e.g. 125. For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Original estimate net present value Revised estimate net present value The project a success. $ $

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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Novak Skateboards is considering building a new plant. Bob Skerritt, the company's marketing manager, is an enthusiastic supporter of the new plant. Lucy Liu, 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 regarding the construction of a new plant. Cost of plant Annual cash inflows Annual cash outflows $3,920,000 3,920,000 3,469,000 Estimated useful life Salvage value Discount rate 15 years $1,960,000 11% Bob Skerritt believes that these figures understate the true potential value of the plant. He suggests that by manufacturing its own skateboards the company will benefit from a "buy American" patriotism that he believes is common among skateboarders. He also notes that the firm has had numerous quality problems with the skateboards manufactured by its suppliers. He suggests that the inconsistent quality has resulted in lost sales,…
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