Toying With Nature wants to take advantage of children's current fascination with dinosaurs by adding several scale-model dinosaurs to its existing product line. Annual sales of the dinosaurs are estimated at 80,000 units at a price of $6 per unit. Variable manufacturing costs are estimated at $2.50 per unit, incremental fixed manufacturing costs (excluding depreciation) at $45,000 annually, and additional selling and general expenses related to the dinosaurs at $51,000 annually. To manufacture the dinosaurs, the company must invest $350,000 in design molds and special equipment. Since toy fads wane in popularity rather quickly, Toying With Nature anticipates the special equipment will have a three-year service life with only a $20,000 salvage value. Depreciation will be computed on a straight-line basis. All revenue and expenses other than depreciation will be received or paid in cash. The company's combined federal and state income tax rate is 40 percent.
Toying With Nature wants to take advantage of children's current fascination with dinosaurs by adding several scale-model dinosaurs to its existing product line. Annual sales of the dinosaurs are estimated at 80,000 units at a price of $6 per unit. Variable manufacturing costs are estimated at $2.50 per unit, incremental fixed manufacturing costs (excluding depreciation) at $45,000 annually, and additional selling and general expenses related to the dinosaurs at $51,000 annually. To manufacture the dinosaurs, the company must invest $350,000 in design molds and special equipment. Since toy fads wane in popularity rather quickly, Toying With Nature anticipates the special equipment will have a three-year service life with only a $20,000 salvage value. Depreciation will be computed on a straight-line basis. All revenue and expenses other than depreciation will be received or paid in cash. The company's combined federal and state income tax rate is 40 percent.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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1 & 2 are correct. I need help on 3.
Please I need fast without plagiarism
Transcribed Image Text:Toying With Nature wants to take advantage of children's current fascination with
dinosaurs by adding several scale-model dinosaurs to its existing product line. Annual
sales of the dinosaurs are estimated at 80,000 units at a price of $6 per unit. Variable
manufacturing costs are estimated at $2.50 per unit, incremental fixed manufacturing
costs (excluding depreciation) at $45,000 annually, and additional selling and general
expenses related to the dinosaurs at $51,000 annually.
To manufacture the dinosaurs, the company must invest $350,000 in design molds
and special equipment. Since toy fads wane in popularity rather quickly, Toying With
Nature anticipates the special equipment will have a three-year service life with only a
$20,000 salvage value. Depreciation will be computed on a straight-line basis. All
revenue and expenses other than depreciation will be received or paid in cash. The
company's combined federal and state income tax rate is 40 percent.
Transcribed Image Text:c. Compute the following. Assume discounted at an annual rate of 15 percent. Use
Exhibit 26-3 and 26-4 where necessary. (Round your "PV factors" to 3 decimal
places. Round "Playback period" and "Return on average investment" to 1 decimal
places.)
(1) Payback period
(2)
Return on average
investment
(3) Net present value
2.3 years
24.0 %
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