A company will sell Widgets to consumers at a price of $85 per unit. The variable...

60.1K

Verified Solution

Question

Accounting

A company will sell Widgets to consumers at a price of $85 perunit. The variable cost to produce Widgets is $23 per unit. Thecompany expects to sell 15,000 Widgets to consumers each year. Thefixed costs incurred each year will be $110,000. There is aninitial investment to produce the goods of $2,900,000 which will bedepreciated straight line over the 13 year life of the investmentto a salvage value of $0. The opportunity cost of capital is 10%and the tax rate is 31%.
a) What is operating cash flow each year? answer 634953.85
b) Using the an annual operating cash flow of $634,953.85, whatis the net present value of this investment?
Should the company accept or reject this project?
I know how to do part a but i dont know how to do part b, can uprovide steps please

Answer & Explanation Solved by verified expert

4.1 Ratings (622 Votes)

Dear sirmaam The answer for the above question is a Particulars Per unit Units Value Sales 85 15000 1275000 Fixed cost 110000 Variable cost 23 15000 345000 820000 Depreciation 223077 596923 Tax 185046 Net of See Answer

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