Required: 1. Compute the net present value of the project. (Hint Use Microsoft Excel to calculate the discount factor(s)) (Do not roum intermediate calculations and PV factor. Round the final answers to the nearest whole dollar. Negative value should t indicated with minus sign.) 2. Would you recommend that the project be undertaken? 1. Net present value 2. Would you recommend that the project be undertaken?
Required: 1. Compute the net present value of the project. (Hint Use Microsoft Excel to calculate the discount factor(s)) (Do not roum intermediate calculations and PV factor. Round the final answers to the nearest whole dollar. Negative value should t indicated with minus sign.) 2. Would you recommend that the project be undertaken? 1. Net present value 2. Would you recommend that the project be undertaken?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Subject: acounting
Transcribed Image Text:Winthrop Company has an opportunity to manufacture and sell a new product for a five-year period. To pursue this opportunity, the
company would need to purchase a piece of equipment for $130,000. The equipment would have a useful life of five years and a
$10,000 salvage value. The CCA rate for the equipment is 30%. After careful study, Winthrop estimated the following annual costs
and revenues for the new product:
Sales revenues
Variable expenses
Fixed expenses
$250,000
$130,000
$ 70,000
The company's tax rate is 30% and its after-tax cost of capital is 10%.
Required:
1. Compute the net present value of the project. (Hint Use Microsoft Excel to calculate the discount factor(s).) (Do not round
intermediate calculations and PV factor. Round the final answers to the nearest whole dollar. Negative value should be
indicated with minus sign.)
2. Would you recommend that the project be undertaken?
1. Net present value
2. Would you recommend that the project be undertaken?
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