Good Time Corparation is considering investing in a new engine is expected to increase the...
60.1K
Verified Solution
Link Copied!
Question
Finance
Good Time Corparation is considering investing in a new engine is expected to increase the production produced. Price of the machine to be purchased $ 1,000,000 with an economic life of 5 years. The machine is depressed by the straight line method. The machine is expected to produce 30,000 units of product every year at a price of $ 60 in the first year and due to price increases are expected to rise by 5% every year. Unit production costs are $ 30 in the first year and will increase at 5% per year. This project has an annual fixed cost of $ 225,000 investment requires a net working capital of $ 35,000. Corporate tax is 35% and the discount rate is 12%, calculated using the net present value (NPV) technique, Profitability Index (PI), Internal Return Rate (IRR) and Modified Internal Return Rate (MIRR), Is the investment in this new machine worth it? Explain your analysis.
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: Zin AI - Your personal assistant for all your inquiries!
