Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Financial Accounting Expert

Problem: Parker Products manufactures a variety of household products. The company is considering introducing a new detergent. The company’s CFO has collected the following information about the proposed product. (Note: You may or may not need to use all of this information, use only the information that is relevant.)

The project has an expected economic life of 4 years.

The company will have to purchase a new machine to produce the detergent. The machine has an up-front cost (t = 0) of $2 million. The machine will be fully depreciated using the straight-line method over 4 years. The company expects that the machine will last for four years, and that after four years, its salvage value will equivalent zero.

If the company goes ahead with the proposed product, it will have the effect on the company’s net operating working capital. At the outset, t = 0, inventory will raise by $140,000 and accounts payable will rise by $40,000. At t = 4, the net operating working capital will be recovered after the project is completed.

The detergent is anticipated to generate sales revenue of $1 million the first year (t = 1), $2 million the second year (t = 2), $2 million the third year (t = 3), and $1 million the final year (t = 4). Each year the operating costs (not comprising depreciation) are expected to equivalent 50 percent of sales revenue.

The company’s interest expense each year will be $100,000.

The new detergent is anticipated to reduce the after-tax cash flows of the company’s existing products by $250,000 a year (t = 1, 2, 3, and 4).

The project’s discount rate is estimated to be 12 percent. The company’s tax rate is 40 percent.

What is the NPV of the proposed project?

Financial Accounting, Accounting

  • Category:- Financial Accounting
  • Reference No.:- M93588

Have any Question? 


Related Questions in Financial Accounting

Compare and contrast two or more models of health leader

Compare and contrast two or more models of health leader assessment and evaluation and analyze the process of capturing metrics for this assessment and evaluation within a health organization. This question has to do wit ...

Intermediate accountingthe following information is

Intermediate Accounting The following information is available for the pension plan of Jones Company for the year 2014. Actual and expected return on plan assets $ 15,000 Benefits paid to retirees 40,000 Contributions (f ...

Assignment reorganizations and consolidated tax

Assignment: Reorganizations and Consolidated Tax Returns Suppose you are a CPA, and you have a corporate client that has been operating for several years. The company is considering expansion through reorganizations. The ...

Outdoor furniture company has inventory balances at the end

Outdoor Furniture Company has inventory balances at the end of August as follows: Materials inventory $21,360 Work-in-Process inventory 15,112 Finished goods inventory 17,120 Job order cost cards for jobs in process at t ...

Assignmentat this point you have examined three years of

Assignment At this point you have examined three years of financial statements for your firm and produced a proforma statement. You have also determined their sustainable growth rate as well. You have also learned about ...

Briefly describe a health care provider with which you are

Briefly describe a health care provider with which you are familiar and how that organization should position its offerings. Provide specific examples to support your response. Referring to the same health care provider, ...

Robert wondered why he was always so stressed out when he

Robert wondered why he was always so stressed out when he was dealing with Lucas, the latest addition to his team. On the face of it, the new hire seemed very agreeable and supportive, but whatever interactions he had ha ...

Cash budget extra creditrahman products a distributor of

Cash Budget Extra Credit Rahman Products, a distributor of organic beverages, needs a cash budget for December. The following information is available: a. The cash balance at the beginning of December $12,000. b. Actual ...

Determine how you would segment the market to conduct

Determine how you would segment the market to conduct research for the health care product or service you found. Explain your rationale. Referring to the same health care product or service, determine the most effective ...

What is the impact of implementing a lean system on the

What is the impact of implementing a lean system on the relationship between managers and employees? Does the lean systems have a positive or a negative impact on the relationships between managers and workers?

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

Section onea in an atwood machine suppose two objects of

SECTION ONE (a) In an Atwood Machine, suppose two objects of unequal mass are hung vertically over a frictionless

Part 1you work in hr for a company that operates a factory

Part 1: You work in HR for a company that operates a factory manufacturing fiberglass. There are several hundred empl

Details on advanced accounting paperthis paper is intended

DETAILS ON ADVANCED ACCOUNTING PAPER This paper is intended for students to apply the theoretical knowledge around ac

Create a provider database and related reports and queries

Create a provider database and related reports and queries to capture contact information for potential PC component pro

Describe what you learned about the impact of economic

Describe what you learned about the impact of economic, social, and demographic trends affecting the US labor environmen