M&P Electronics, Inc., projects unit sales for a new wearable Al training device for athletes. Production...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
M&P Electronics, Inc., projects unit sales for a new wearable Al training device for athletes. Production of the devices will require $4,500,000 in net working capital to start and additional net working capital investments each year equal to 12 percent of the projected sales increase for the following year. Total fixed costs are $4,900,000 per year, variable production costs are $385 per unit, and the units are priced at $550 each. The equipment needed to begin production has an installed cost of $17,000,000. Because the wearable Al technology are intended for professional athletes, this equipment is considered industrial machinery and thus qualifies as seven-year MACRS property. In five years, this equipment can be sold for about 20 percent of its acquisition cost. M&P is in the 35 percent marginal tax bracket and has a required return on all its projects of 18 percent. PROJECTED SALES Unit Sales Year 12345 2 92,000 103,900 109,700 96,500 98,800 MACRS DEPRECIATION BY CLASS OF PROPERTY MACRS 7-year property (ex: office furniture and fixtures such as desks, fax machines, lamps, files, chairs). Rate 14.29% 24.49% 17.49% 12.49% Year 1 2 3 3 MACRS DEPRECIATION BY CLASS OF PROPERTY MACRS 7-year property (ex: office furniture and fixtures such as desks, fax machines, lamps, files, chairs). Rate 14.29% Year 1 2 3 4 5678 24.49% 17.49% 12.49% 8.93% 8.92% 8.93% 4.46% 1. Prepare the financial statements based on the information provide. 2. Based on the project estimates, what is the NPV of the project? 3. What is the IRR? M&P Electronics, Inc., projects unit sales for a new wearable Al training device for athletes. Production of the devices will require $4,500,000 in net working capital to start and additional net working capital investments each year equal to 12 percent of the projected sales increase for the following year. Total fixed costs are $4,900,000 per year, variable production costs are $385 per unit, and the units are priced at $550 each. The equipment needed to begin production has an installed cost of $17,000,000. Because the wearable Al technology are intended for professional athletes, this equipment is considered industrial machinery and thus qualifies as seven-year MACRS property. In five years, this equipment can be sold for about 20 percent of its acquisition cost. M&P is in the 35 percent marginal tax bracket and has a required return on all its projects of 18 percent. PROJECTED SALES Unit Sales Year 12345 2 92,000 103,900 109,700 96,500 98,800 MACRS DEPRECIATION BY CLASS OF PROPERTY MACRS 7-year property (ex: office furniture and fixtures such as desks, fax machines, lamps, files, chairs). Rate 14.29% 24.49% 17.49% 12.49% Year 1 2 3 3 MACRS DEPRECIATION BY CLASS OF PROPERTY MACRS 7-year property (ex: office furniture and fixtures such as desks, fax machines, lamps, files, chairs). Rate 14.29% Year 1 2 3 4 5678 24.49% 17.49% 12.49% 8.93% 8.92% 8.93% 4.46% 1. Prepare the financial statements based on the information provide. 2. Based on the project estimates, what is the NPV of the project? 3. What is the IRR?
Expert Answer:
Related Book For
Fundamentals of Corporate Finance
ISBN: 978-0077861629
8th Edition
Authors: Stephen A. Ross, Randolph W. Westerfield, Bradford D.Jordan
Posted Date:
Students also viewed these accounting questions
-
Aguilera Acoustics, Inc. (AAI) projects unit sales for a new seven-octave voice emulation implant as follows: Year Unit Sales 1 ..................... 88,000 2 ..................... 96,000 3...
-
Aguilera Acoustics, Inc. (AAI), projects unit sales for a new seven-octave voice emulation implant as follows: Year Unit Sales 1......1,000 2 94,000 3108,000 4103,000 5 84,000 Production of the...
-
Aguilera Acoustics, Inc. (AAI), projects unit sales for a new seven-octave voice emulation implant as follows: Year Unit Sales 1 ..........83,000 2 ..........92,000 3 ..........104,000 4...
-
Case 2: Company DEF I have 20 staff, with 2 groups rotating the shift. Group 1: - working 6 days in week 1 and week 3. - Working 5 days in week 2 and week 4 Group 2: - working 6 days in week 2 and...
-
Consider the revised Coal Bank Hollow recycling problem discussed in section 5.5.4 of this chapter. We said that it is safest to assume the supply in a generalized network flow problem is capable of...
-
Honk, Inc., a U.S. corporation, purchases weight-lifting equipment for resale from HiDisu, a Japanese corporation, for 60 million yen. On the date of purchase, 110 yen is equal to $1 U.S. (110:$1)....
-
How many accounts are involved in recording the sale of merchandise on credit?
-
Smith, Inc., has the following stockholders' equity accounts as of January 1, 2013: Preferred stock-$100 par, nonvoting and nonparticipating, 8 percent cumulative dividend . . . . . . . . . . . . . $...
-
In the United States, federal taxes on investors' capital gains income are lower than the tax rates on dividend income. Despite being taxed at a higher rate than capital gains, why would a...
-
Read the following two-part scenario and answer the questions provided. In each of your responses, please include: A clear answer that shows your understanding of the course material All of the...
-
1 . Assume that all lead times are one week, and that lot - for - lot ordering is used except for item F which is ordered in multiples of 4 0 0 units. 2 . One hundred units of P are needed at the...
-
The principles of feedback and control are not restricted to engineering and biological systems. There are many applications and occurrences of feedback control concepts in the socioeconomic and...
-
How can people process capability be built and why is it important?
-
Describe the strategy execution void and the relative importance of strategy versus execution.
-
Will the BPM maturity of the organization impact the implementation of BPM and, if so, why?
-
Consider Table 10.1, which has data on insurance status and medical expenditures for different types of professors at Adverse Selection University (ASU). In 2014, every employee of ASU was offered a...
-
For the system shown in the following figure, obtain the equations of motion by using the Lagrange equations. Let q = 0, and q = 0. Linearize your equations by assuming that both , and are small. (3...
-
The cost curve for the city water supply is C(Q) = 16 + 1/4 Q2, where Q is the amount of water supplied and C(Q) is the cost of providing Q acre-feet of water. (An acre-foot is the amount of water...
-
IPO Pricing the Eyetech IPO was underpriced by about 54 percent. Should Eyetech be upset at Merrill Lynch over the under-pricing?
-
Voting Rights some companies, such as Readers Digest have created classes of stock with no voting rights at all why would investors buy such stock?
-
Homemade Leverage home body, Inc., a prominent consumer products firm, is debating whether to convert its all-equity capital structure to one that is 50 percent debt. Currently, there are 5,000...
-
What is the average rate of return for the values that follow? 0.90, 1.1, 1.2
-
What is the average rate of return for the values that follow? 0.80, 2.0, 5.0
-
State whether the data are symmetrical, skewed to the left, or skewed to the right. 16; 17; 19; 22; 22; 22; 22; 22; 23
Study smarter with the SolutionInn App