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

Research the major risks for businesses that indulge in

Research the major risks for businesses that indulge in commercial applications of social networking. Also, review the readings on page 311 of your textbook about how organizations can respond to social networking proble ...

Nmims global accessschool for continuing education

NMIMS Global Access School for Continuing Education (NGA-SCE)  Course: Financial Accounting and Analysis  _____________________________________________________________________________ Question1. Following information is ...

Assignment business plan - finalthis assignment consists of

Assignment: Business Plan - Final This assignment consists of two sections: your final business plan and your business plan financials. Note: You must submit both sections as separate files for the completion of this ass ...

Choose one of the following two assignments to complete

Choose one of the following two assignments to complete this week. Do not do both assignments. Identify your assignment choice in the title of your submission. Option #1: Income Statement, Retained Earnings, and Balance ...

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 ...

Chapter 1 1 which of the following goals of the firm are

Chapter 1 1) Which of the following goals of the firm are synonymous (equivalent) to the maximization of shareholder wealth? A) profit maximization B) maximization of the total market value of the firm's common stock C) ...

1 distinguish groupthink with managing agreement how are

1. Distinguish groupthink with managing agreement. How are these two concepts? similar? 2. Give multiple examples of the advantages and disadvantages associated with? cross-functional teams.

Assessment case study of financial analysis and operating

Assessment: Case Study of Financial Analysis and Operating Ratios In this assessment you will use the income statement and balance sheet information identified below and evaluate the firm's financial condition based on t ...

Discussionanswer in 2-3 paragraphs and use

DISCUSSION ANSWER IN 2-3 PARAGRAPHS AND USE SCHOLARLY SOURCE(S) First, search the internet for the official website of your local city government. If you cannot find your city, select your state. After reviewing this web ...

Discussionpart 1 please respond the following question no

Discussion Part 1 please respond the following question no less then 350 words (original work, no plagiarism, 1 reference) "accounting methods" please respond to the following: • Evaluate the likely impact on a firm's va ...

  • 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

WalMart Identification of theory and critical discussion

Drawing on the prescribed text and/or relevant academic literature, produce a paper which discusses the nature of group

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