Question 17 Koda Agriculture is doing a CBA (cost benefit analysis) on a investment project renewing the machinery used on the farm. The old machinery is sold in the beginning of the project for 33.000 euro. The investment must have positive NPV (net present value) within 5 years. In the end of the period (5 years) the planned reselling value (scrap value) of the equipment is 100.000 euro. The rates used are 8% and inflation is estimated to be 3% a year. List of cost items and benefit items are listed below: What is the NPV? New equipment Initial investment Quantity Cost/item (€) Benefits/year (C) Total improved yield better products labor cost reduction 23.000 tractors conveyor belt threshing machine grain separator irrigation system 3- 50.000 25.000 1- 2- 2- 25.000 23.000 7.000 19.000 1- 60.000 Cost per year Quantity Cost/item (e) operation cost facility cost insurance cost 1- 6.000 1- 12- 3.000 700

Question 17 Koda Agriculture is doing a CBA (cost benefit analysis) on a investment project renewing the machinery used on the farm. The old machinery is sold in the beginning of the project for 33.000 euro. The investment must have positive NPV (net present value) within 5 years. In the end of the period (5 years) the planned reselling value (scrap value) of the equipment is 100.000 euro. The rates used are 8% and inflation is estimated to be 3% a year. List of cost items and benefit items are listed below: What is the NPV? New equipment Initial investment Quantity Cost/item (€) Benefits/year (C) Total improved yield better products labor cost reduction 23.000 tractors conveyor belt threshing machine grain separator irrigation system 3- 50.000 25.000 1- 2- 2- 25.000 23.000 7.000 19.000 1- 60.000 Cost per year Quantity Cost/item (e) operation cost facility cost insurance cost 1- 6.000 1- 12- 3.000 700

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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Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.

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Question 5 An investment of $50,000 is made to purchase machinery that will allow us to manufacture a new product. The annual expenses to make the product are (5,000 + 5x) and the revenues from the product are 30 x, where x = the number of products sold each year. How many products must be sold per year, x, to break even? Consider a 7 year project life and an MARR of 12%.
QUESTION 10 Georgia Mills Company (GMC) purchase a milling machine, which it intends to use for the next five years, for $180,000. This machine is expected to save GMC $35,000 during the first operating year. Then, the annual savings are expected to decrease by 3% each subsequent year over the previous year due to increased maintenance costs. Assuming that GMC would operate the machine for an average of 5,000 hours per year and that the machine would have no appreciable salvage value at the end of the five year period, determine the equivalent dollar savings per operating hour at 15% interest compounded annually. OA $3.24 lost per hour OB. $4.09 lost per hour OC $6.74 lost per hour D.$5.92 lost per hour
QUESTION 1 Frank Einstein Co. is a firm that specializes in selling Halloween decorations. It is evaluating a new project that requires an initial investment of $1.42 million. The asset will be depreciated to zero over its 3-year life. The company's analysts estimate that in the first year, the project will generate $1.09 million in revenues. The revenue will increase by 7% per year in the following two years. The costs in the first year will be $475,000 and they will increase by 5% per year thereafter. The corporate tax rate is 25% and the required return is 12%. What is the NPV of the project?
QUESTION 3 You are considering starting a new factory producing small electric heaters. Each unit will sell at a price of $55. The production cost of each heater is $35. You are expecting to sell 9000 units per year. This project has an economic life of 6 years. The project requires an investment of $700000 in plants and equipment. This equipment will be depreciated to zero salvage value based on 5-year MACRS schedule. The depreciation rates from year 1 to 6 are 20 % ,32 %, 19.2 %, 11.52 %, 11.52 %, and 5.76 percent, respectively. The company will sell its old equipment for $100,000. The old machine is fully depreciated. The required rate of return for the project is 12 percent, the working capital requirement is 10 percent of the next year's sales revenue. The marginal corporate tax rate is 20 percent. At the termination of the project, the plant and equipment will be sold for an estimated value of $50000. Based on these assumptions, estimate the cash flow for capital expenditures.…
Help Save & Exit Subm 16 Assume that a company is considering purchasing a machine for $50,000 that will have a five-year useful life and no salvage value. The machine will lower operating costs by $17,000 per year. The company's required rate of return is 18%. What is the net present value of this investment? Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using table. Multiple Choice $3,159 О $3,896 О О $3,796 $3,359