he divisions. The annual depreciation of the equipment is P6,400; and the annual cost to operate the equipment, regardless of product line manufactured, is P4,600. Product A is expected to yield sales revenue of P71,000 a year with increased costs of production amounting to P42,000. Product B should yield sales revenue of P46,000 a year with increased costs of P15,000. Product C should yield sales revenue of P117,000 with in
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Any one of these different product lines can be produced by Bubble Mills, Inc., with the present equipment in one of the divisions. The annual
Product A is expected to yield sales revenue of P71,000 a year with increased costs of production amounting to P42,000. Product B should yield sales revenue of P46,000 a year with increased costs of P15,000. Product C should yield sales revenue of P117,000 with increased costs of P96,000.
How much is the sunk costs of the company?
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- Pique Corporation wants to purchase a new machine for $378,000. Management predicts that the machine can produce sales of $226,000each year for the next 5 years. Expenses are expected to include direct materials, direct labour, and factory overhead (excludingdepreciation) totalling $76,000 per year. The firm uses straight-line depreciation with no residual value for all depreciable assets. Pique's combined income tax rate is 40%. Management requires a minimum after-tax rate of return of 10% on all investments. What is the present value payback period (rounded to one-tenth of a year)? Note: PV factors for 10% are as follows: year 1 = 0.909; year 2 = 0.826; year 3 = 0.751; year 4 = 0.683; year 5 = 0.621; the PV annuity factor for 10%, 5 years = 3.791 (Assume that the cash inflows occur at year end)The table Top Model corp. produces three products, Tic, Tac, Toc. The owner desires to reduce production load to only one product lien due to the prolonged absence of the production manager. Depreciation expense amounts to P600,000 annually. Other fixed operating expenses amount to P660,000 per year. Which product must be retained and what is the opportunity cost of selecting such product line?Any one of these different product lines can be produced by Bubble Mills, Inc., with the present equipment in one of the divisions. The annual depreciation of the equipment is P6,400; and the annual cost to operate the equipment, regardless of product line manufactured, is P4,600.Product A is expected to yield sales revenue of P71,000 a year with increased costs of production amounting to P42,000. Product B should yield sales revenue of P46,000 a year with increased costs of P15,000. Product C should yield sales revenue of P117,000 with increased costs of P96,000.How much is the sunk costs of the company? a• P19,600 b• P21,400 c• P26,000 d• P11,000
- Hammer Corporation wants to purchase a new machine for $284,000. Management predicts that the machine will produce sales of $187,000 each year for the next 5 years. Expenses are expected to include direct materials, direct labor, and factory overhead (excluding depreciation) totaling $78,000 per year. The firm uses straight-line depreciation with an assumed residual (salvage) value of $50,000. Hammer's combined income tax rate, t, is 20%. Management requires a minimum after-tax rate of return of 10% on all investments. What is the estimated net present value (NPV) of the proposed investment (rounded to the nearest hundred dollars)? (The PV annuity factor for 10%, 5 years, is 3.791 and for 4 years it is 3.17. The present value $1 factor for 10%, 5 years, is 0.621.) Assume that after-tax cash inflows occur at year-end. Multiple Choice $82,100. $113,100. $132,300. $145,300. $103,300.Hammer Corporation wants to purchase a new machine for $387,000. Management predicts that the machine will produce sales of $216,000 each year for the next 5 years. Expenses are expected to include direct materials, direct labor, and factory overhead (excluding depreciation) totaling $73,000 per year. The firm uses straight-line depreciation with an assumed residual (salvage) value of $50,000. Hammer's combined income tax rate, t, is 40%. Management requires a minimum after-tax rate of return of 10% on all investments. What is the approximate internal rate of return (IRR) of the proposed investment? (Note: To answer this question, students should use Table 2 from Appendix C, Chapter 12.) Assume that all cash flows occur at year-end.Natural Foods Inc. is planning to invest in new manufacturing equipment to make a new garden tool. The new garden tool is expected to generate additional annual sales of 7,600 units at $52 each. The new manufacturing equipment will cost $164,600 and is expected to have a 10-year life and a $12,600 residual value. Selling expenses related to the new product are expected to be 5% of sales revenue. The cost to manufacture the product includes the following on a per-unit basis: Direct labor $8.80 Direct materials 28.90 Fixed factory overhead-depreciation 2.00 Variable factory overhead 4.50 Total $44.20 Determine the net cash flows for the first year of the project, Years 2–9, and for the last year of the project. Use the minus sign to indicate cash outflows. Do not round your intermediate calculations but, if required, round your final answers to the nearest dollar. Natural Foods Inc. Net Cash Flows Year 1 Years 2-9 Last Year Initial investment $…
- Hammer Corporation wants to purchase a new machine for $303,000. Management predicts that the machine will produce sales of $216,000 each year for the next 5 years. Expenses are expected to include direct materials, direct labor, and factory overhead (excluding depreciation) totaling $80,000 per year. The firm uses straight-line depreciation with an assumed residual (salvage) value of $50,000. Hammer's combined income tax rate, t, is 50%. What is the estimated accounting (book) rate of return (ARR) for the proposed investment, based on average investment? (Round answer to nearest whole number/percentage.)Stranger Things Corporation is planning to add a new product to its line. To package this product, the company needs to buy a new machine at a cost of $518,000 cost with an expected four-year life and $15,000 salvage value. Additional annual information for this new product line follows: Sales of new product Cost of Goods Sold (does not include depreciation) Selling, general, and administrative expenses (does not include depreciation) Required: (1) Determine income and net cash flow for each year of this machine's life. $ 1,750,000 1,248,000 (2) Compute this machine's payback period, assuming that cash flows occur evenly throughout each year. 315,000 (3) Compute net present value for this machine using a discount rate of 5%. Use the Present Value Tables below.Natural Foods Inc. is planning to invest in new manufacturing equipment to make a new garden tool. The new garden tool is expected to generate additional annual sales of 8,800 units at $32 each. The new manufacturing equipment will cost $114,400 and is expected to have a 10-year life and a $8,800 residual value. Selling expenses related to the new product are expected to be 5% of sales revenue. The cost to manufacture the product includes the following on a per-unit basis: Direct labor $5.40 Direct materials 17.90 Fixed factory overhead-depreciation 1.20 Variable factory overhead 2.70 Total $27.20 Determine the net cash flows for the first year of the project, Years 2-9, and for the last year of the project. Use the minus sign to indicate cash outflows. Do not round your intermediate calculations but, if required, round your final answers to the nearest dollar. Natural Foods Inc. Net Cash Flows Year 1 Years 2-9 Last Year Initial investment Operating cash flows: Annual revenues Selling…
- Natural Foods Inc. is planning to invest in new manufacturing equipment to make a new garden tool. The new garden tool is expected to generate additional annual sales of 6,700 units at $36 each. The new manufacturing equipment will cost $101,600 and is expected to have a 10-year life and a $7,800 residual value. Selling expenses related to the new product are expected to be 5% of sales revenue. The cost to manufacture the product includes the following on a per-unit basis: Direct labor $6.10 Direct materials 20.00 Fixed factory overhead-depreciation 1.40 Variable factory overhead 3.10 Total $30.60 Determine the net cash flows for the first year of the project, Years 2-9, and for the last year of the project. Use the minus sign to indicate cash outflows. Do not round your intermediate calculations but, if required, round your final answers to the nearest dollar. Natural Foods Inc. Net Cash Flows Year 1 Years 2-9 Last Year Initial investment -101,600 Operating cash flows: Annual revenues…Nature’s Way Inc. is planning to invest in new manufacturing equipment to make a new garden tool. The garden tool is expected to generate additional annual sales of 5,900 units at $52 each. The new manufacturing equipment will cost $127,800 and is expected to have a 10-year life and $9,800 residual value. Selling expenses related to the new product are expected to be 4% of sales revenue. The cost to manufacture the product includes the following on a per-unit basis: Direct labor $8.8 Direct materials 28.9 Fixed factory overhead-depreciation 2 Variable factory overhead 4.5 Total $44.2 Determine the net cash flows for the first year of the project, Years 2–9, and for the last year of the project. Use the minus sign to indicate cash outflows. Do not round your intermediate calculations but, if required, round your final answer to the nearest dollar. Nature’s Way Inc. Net Cash Flows Year 1 Years 2-9 Last Year Initial investment Operating cash…Natural Foods Inc. is planning to invest in new manufacturing equipment to make a new garden tool. The new garden tool is expected to generate additional annual sales of 7,600 units at $38 each. The new manufacturing equipment will cost $123,500 and is expected to have a 10-year life and a $9,500 residual value. Selling expenses related to the new product are expected to be 5% of sales revenue. The cost to manufacture the product includes the following on a per-unit basis: Direct labor $6.50 Direct materials 21.00 Fixed factory overhead-depreciation 1.50 Variable factory overhead 3.30 Total $32.30 Determine the net cash flows for the first year of the project, Years 2–9, and for the last year of the project. Use the minus sign to indicate cash outflows. Do not round your intermediate calculations but, if required, round your final answers to the nearest dollar. Natural Foods Inc.Net Cash Flows Year 1 Years 2-9 Last Year Initial investment $fill in the blank 1…