308.3 original assignmnet question

Project Description:

company a has developed a newly patented product—a corner fan with two blades that will fully circulate air in an l-shaped room. to bring the product to market, company a will need to purchase a new production machine at a cost of $360,000. the new machine will be depreciated using the double declining balance method using a six-year life for three years, and then the method will be changed to straight line for the remaining three years

expected weekly sales volume: 200 units

selling price: $86

incremental direct material costs per unit: $42

incremental direct labor cost per unit: $16

incremental manufacturing overhead allocation per unit: $12.50

incremental annual selling and administration expenses: $60,000

cost of capital: 15%

corporate marginal tax rate: 25%

company a expects a salvage value of $30,000 for this machine at the end of six years. an additional $40,000 in working capital will be required to support the operation of the machine due to the additional raw material inventory needed.


a. using the attached “new investment analysis template” and the information provided in the given, calculate the following:

1. payback period

2. net present value (npv)

3. internal rate of return (irr)

4. profitability index (using npv in the calculation)
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Price Type: Negotiable

Total Proposals: 1
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