You are considering starting a new factory producing small electric heaters. Each unit will sell at a price of $65. The production cost of each heater is $50. The fixed cost of production is $58000. This project has an economic life of 11 years. The project requires an investment of $440000 in plants and equipment. This equipment will be depreciated using a straight line depreciation method to a salvage value of zero. The required rate of return for the project is 10.5 percent. The marginal corporate tax rate is 22 percent. Based on these assumptions, calculate the number of units of production at the accounting (net profit) break-even point. O6133.33 O 6782.3 O6533.33 O 6543

You are considering starting a new factory producing small electric heaters. Each unit will sell at a price of $65. The production cost of each heater is $50. The fixed cost of production is $58000. This project has an economic life of 11 years. The project requires an investment of $440000 in plants and equipment. This equipment will be depreciated using a straight line depreciation method to a salvage value of zero. The required rate of return for the project is 10.5 percent. The marginal corporate tax rate is 22 percent. Based on these assumptions, calculate the number of units of production at the accounting (net profit) break-even point. O6133.33 O 6782.3 O6533.33 O 6543

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 2TP: Austins cell phone manufacturer wants to upgrade their product mix to encompass an exciting new...

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QUESTION 2 You are considering starting new factory producing small electric heaters. Each unit will sell at a price of $55. The production cost of each heater is $35. You are expecting to sell 9000 units per year. This project has an economic life of 6 years. The project requires an investment of $700000 in plants and equipment. This equipment will be depreciated to zero salvage value based on 5-year MACRS schedule. The depreciation rates from year 1 to 6 are 20 % ,32 %, 19.2 %, 11.52 %, 11.52 %, and 5.76 percent, respectively. The required rate of return for the project is 12 percent, the working capital requirement is 10 percent of the next year's sales revenue. The company will sell its old equipment for $100,000. The old machine is fully depreciated. The marginal corporate tax rate is 20 percent. At the termination of the project, the plant and equipment will be sold for an estimated value of $50000. Based on these assumptions, estimate the working capital requirements for the…
QUESTION 2 You are considering starting a new factory producing small electric heaters. Each unit will sell at a price of $120. The production cost of each heater is $90. The fixed cost of production is $35000. You are expecting to sell 3000 units per year. This project has an economic life of 5 years. The project requires an investment of $125000 in plants and equipment. This equipment will be depreciated using a straight-line depreciation method to a salvage value of zero. The required rate of return for the project is 12 percent. The marginal corporate tax rate is 21 percent. Do a sensitivity analysis using different numbers of production units. Assume that number of units can be between 2400 and 3750 units. What is the minimum net present value based on the range of units expected to be sold?
QUESTION 4 You are considering starting a new factory producing small electric heaters. Each unit will sell at a price of $55. The production cost of each heater is $35. You are expecting to sell 9000 units per year. This project has an economic life of 6 years. The project requires an investment of $700000 in plants and equipment. This equipment will be depreciated to zero salvage value based on 5-year MACRS schedule. The depreciation rates from year 1 to 6 are 20 % , 32 %, 19.2 %, 11.52 %, 11.52 %, and 5.76 percent, respectively. The required rate of return for the project is 12 percent, the working capital requirement is 10 percent of the next year's sales revenue. The company will sell its old equipment for $100,000. The old machine is fully depreciated. The marginal corporate tax rate is 20 percent. At the termination of the project, the plant and equipment will be sold for an estimated value of $50000. Based on these assumptions, estimate the total cash flows for the project.…
QUESTION 3 You are considering starting a new factory producing small electric heaters. Each unit will sell at a price of $55. The production cost of each heater is $35. You are expecting to sell 9000 units per year. This project has an economic life of 6 years. The project requires an investment of $700000 in plants and equipment. This equipment will be depreciated to zero salvage value based on 5-year MACRS schedule. The depreciation rates from year 1 to 6 are 20 % ,32 %, 19.2 %, 11.52 %, 11.52 %, and 5.76 percent, respectively. The company will sell its old equipment for $100,000. The old machine is fully depreciated. The required rate of return for the project is 12 percent, the working capital requirement is 10 percent of the next year's sales revenue. The marginal corporate tax rate is 20 percent. At the termination of the project, the plant and equipment will be sold for an estimated value of $50000. Based on these assumptions, estimate the cash flow for capital expenditures.…
QUESTION 5 You are considering starting a new factory producing small electric heaters. Each unit will sell at a price of $17. The production cost of each heater is $12. The fixed cost of production is $18000. This project has an economic life of 8 years. The project requires an investment of $185000 in plants and equipment. This equipment will be depreciated using a straight-line depreciation method to a salvage value of zero. The required rate of return for the project is 11 percent. The marginal corporate tax rate is 21 percent. Based on these assumptions, calculate the number of units of production at the net present value (financial) break-even point. O 11371.58 O 11485 O 11471.68 O 11215.37
QUESTION 3 You are considering starting a new factory producing small electric heaters. Each unit will sell at a price of $65. The production cost of each heater is $50. The fixed cost of production is $40000. You are expecting to sell 8200 units per year. This project has an economic life of 7 years. The project requires an investment of $285000 in plants and equipment. This equipment will be depreciated using a straight line depreciation method to a salvage value of zero. The required rate of return for the project is 14 percent. The marginal corporate tax rate is 22 percent. Do a sensitivity analysis using different sales prices per unit. Assume that the sales price can be between $81.25 and $58.5. What is the maximum net present value based on the range of the sales price per unit? O 31036 O 476741 O 691022 O 305316
QUESTION 6 You are considering starting a new factory producing small electric heaters. Each unit will sell at a price of $55. The production cost of each heater is $35. You are expecting to sell 9000 units per year. This project has an economic life of 6 years. The project requires an investment of $700000 in plants and equipment. This equipment will be depreciated to zero salvage value based on 5-year MACRS schedule. The depreciation rates from year 1 to 6 are 20 %,32 %, 19.2 %, 11.52 %, 11.52 %, and 5.76 percent, respectively. The required rate of return for the project is 12 percent, the working capital requirement is 10 percent of the next year's sales revenue. The company will sell its old equipment for $100,000. The old machine is fully depreciated. The marginal corporate tax rate is 20 percent. At the termination of the project, the plant and equipment will be sold for an estimated value of $50000. Based on these assumptions, estimate the internal rate of return for this…