TopCap Company is evaluating the purchase of another sewing machine that will be used to manufacture sport caps. The invoice price of the machine is $122,000. In addition, delivery and installation costs will total $5,000. The machine has the capacity to produce 12,000 dozen caps per year. Sales are forecast to increase gradually, and production volumes for each of the five years of the machine's life are expected to be as follows: Use Table 6-4. Note: Use appropriate factor(s) from the tables provided. Round the PV factors to 4 decimals. 2022 2023 2024 2025 2026 3,600 dozen 5,600 dozen 8,500 dozen 11,300 dozen 12,000 dozen The caps have a contribution margin of $8.00 per dozen. Fixed costs associated with the additional production (other than depreciation expense) will be negligible. Salvage value and the investment in working capital should be ignored. TopCap Company's cost of capital for this capacity expansion has been set at 14%.

TopCap Company is evaluating the purchase of another sewing machine that will be used to manufacture sport caps. The invoice price of the machine is $122,000. In addition, delivery and installation costs will total $5,000. The machine has the capacity to produce 12,000 dozen caps per year. Sales are forecast to increase gradually, and production volumes for each of the five years of the machine's life are expected to be as follows: Use Table 6-4. Note: Use appropriate factor(s) from the tables provided. Round the PV factors to 4 decimals. 2022 2023 2024 2025 2026 3,600 dozen 5,600 dozen 8,500 dozen 11,300 dozen 12,000 dozen The caps have a contribution margin of $8.00 per dozen. Fixed costs associated with the additional production (other than depreciation expense) will be negligible. Salvage value and the investment in working capital should be ignored. TopCap Company's cost of capital for this capacity expansion has been set at 14%.

Name: Required:a. Calculate the net present value of the proposed investmen
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Description: Required:a. Calculate the net present value of the proposed investment in the new sewingmachine.b. Calculate the present value ratio of the investment.c. What is the internal rate of return of this investment relative to the cost of capital?d. Calcu

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter14: Capital Structure Management In Practice

Section14.A: Breakeven Analysis

Problem 8P

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TopCap Co. is evaluating the purchase of another sewing machine that will be used to manufacture sport caps. The invoice price of the machine is $123,000. In addition, delivery and installation costs will total $5,500. The machine has the capacity to produce 12,000 dozen caps per year. Sales are forecast to increase gradually, and production volumes for each of the five years of the machine's life are expected to be as follows: Use Table 6-4. (Use appropriate factor(s) from the tables provided. Round the PV factors to 4 decimals.) 2019 3,600 dozen 2020 5,600 dozen 2021 8,500 dozen 2022 11,300 dozen 2023 12,000 dozen The caps have a contribution margin of $8.00 per dozen. Fixed costs associated with the additional production (other than depreciation expense) will be negligible. Salvage value and the investment in working capital should be ignored. TopCap Co.'s cost of capital for this capacity expansion has been set at 14%. Required: The caps have a…
TopCap Company is evaluating the purchase of another sewing machine that will be used to manufacture sport caps. The invoice price of the machine is $123,500. In addition, delivery and installation costs will total $5,500. The machine has the capacity to produce 12,000 dozen caps per year. Sales are forecast to increase gradually, and production volumes for each of the five years of the machine's life are expected to be as follows: Use Table 6-4. Note: Use appropriate factor(s) from the tables provided. Round the PV factors to 4 decimals. 2022 2023 2024 2025 2026 3,600 dozen 5,600 dozen 8,500 dozen 11,300 dozen 12,000 dozen The caps have a contribution margin of $9.00 per dozen. Fixed costs associated with the additional production (other than depreciation expense) will be negligible. Salvage value and the investment in working capital should be ignored. TopCap Company's cost of capital for this capacity expansion has been set at 10%. Required: a. Calculate the net present value of the…
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