Homesaver Ltd believes it can sell 10,000 home smoke detectors per year at Rs30 each. They cost Rs20 each to manufacture (variable cost). Fixed production costs will run to R$30,000 per year. The necessary equipment costs Rs150,000 to buy and will be depreciated prime cost to a zero-salvage value over the 5-year life of the project. The actual value will be Rs10,000 in 5 years. The discount rate is 12%, and the tax rate is 30%. What do you think of the proposal?

Homesaver Ltd believes it can sell 10,000 home smoke detectors per year at Rs30 each. They cost Rs20 each to manufacture (variable cost). Fixed production costs will run to R$30,000 per year. The necessary equipment costs Rs150,000 to buy and will be depreciated prime cost to a zero-salvage value over the 5-year life of the project. The actual value will be Rs10,000 in 5 years. The discount rate is 12%, and the tax rate is 30%. What do you think of the proposal?

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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