Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. accounting
  3. 1) a company invests in a new project that require

1) A company invests in a new project that requires an initial capital outlay of...

90.2K

Verified Solution

Question

Accounting

1) A company invests in a new project that requires an initial capital outlay of $852790. The project will generate annual net cash flows of $145612 over a period of 8 years. The after-tax cost of capital is 9%. In addition, a working capital outlay of $94620 will be required. This working capital outlay will be recovered at the end of the projects life.

What is the net present value of the project?

Select one:

a. $-141474

b. $-93987

c. $312106

d. $-46854

2) Data relating to Randall Ltd.s single product are as follows:

Selling price

$5.16

Direct materials

0.82

Direct labour

0.85

Overhead (60% fixed)

0.99

Gross Profit

$2.5

The company currently produces 56699 units.

Randall Ltd. is considering purchasing a new machine that is expected to decrease variable costs by 14%. The expected useful life of the new machine is 11 years.

Assuming a weighted average cost of capital of 8%, what is the net present value of the increase in contribution margin relating to this investment?

Select one:

a. $117076

b. $191826

c. $7034

d. There is a decrease in the contribution margin.

Answer & Explanation Solved by verified expert
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students