Ursus, Incorporated, is considering a project that would have a ten-year life and would require a $2,552,000 investment in equipment. At the end of ten years, the project would terminate and the equipment would have no salvage value. The project would provide net operating income each year as follows (Ignore income taxes.): Sales Variable expenses Contribution margin Fixed expenses: Fixed out-of-pocket cash expenses Depreciation Net operating income b. Compute the project's internal rate of return. Note: Round your final answer to the nearest whole percent. $ 270,000 255,200 All of the above items, except for depreciation, represent cash flows. The company's required rate of return is 14%. Required: a. Compute the project's net present value. Note: Round your intermediate calculations and final answer to the nearest whole dollar amount. c. Compute the project's payback period. Note: Round your answer to 2 decimal place. d. Compute the project's simple rate of return. Note: Round your final answer to the nearest whole percent. a. Net present value b. Internal rate of return c. Payback period d. Simple rate of return $ % years % $ 2,400,000 1,550,000 850,000 525,200 $ 324,800
Ursus, Incorporated, is considering a project that would have a ten-year life and would require a $2,552,000 investment in equipment. At the end of ten years, the project would terminate and the equipment would have no salvage value. The project would provide net operating income each year as follows (Ignore income taxes.): Sales Variable expenses Contribution margin Fixed expenses: Fixed out-of-pocket cash expenses Depreciation Net operating income b. Compute the project's internal rate of return. Note: Round your final answer to the nearest whole percent. $ 270,000 255,200 All of the above items, except for depreciation, represent cash flows. The company's required rate of return is 14%. Required: a. Compute the project's net present value. Note: Round your intermediate calculations and final answer to the nearest whole dollar amount. c. Compute the project's payback period. Note: Round your answer to 2 decimal place. d. Compute the project's simple rate of return. Note: Round your final answer to the nearest whole percent. a. Net present value b. Internal rate of return c. Payback period d. Simple rate of return $ % years % $ 2,400,000 1,550,000 850,000 525,200 $ 324,800
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter19: Capital Investment
Section: Chapter Questions
Problem 10E: Roberts Company is considering an investment in equipment that is capable of producing more...
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