Question: A planned factory expansion project has an estimated initial cost of $800,000. Based on a discount rate of 20 percent, the present value of the

A planned factory expansion project has an estimated initial cost of $800,000. Based on a of 20 percent, the present value of the future cost savings from the expansion is $843,000.

Required
To yield exactly a 20 percent return on investment, the actual investment expenditure should not exceed the $800,000 estimated cost by more than what amount?

Step by Step Solution

★★★★★

3.43 Rating (162 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock

As estimated the NPV of the project is 43000 As suc... View full answer

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Document Format (1 attachment)

420-B-M-A-D-M (2541).docx

120 KBs Word File

Students Have Also Explored These Related Managerial Accounting Questions!

A proposed factory expansion project has an expected net present value of $100,000 with a standard deviation of $50,000.What is the probability that the project will have a negative net present value...

An investment is worth the present value of its future cash flows. Since a company is a series of investments, it is worth the total present value of all cash flows generated by the firm

Target Company is trading at $20 a share at the end of the year 2006 and has 1 million shares outstanding. Acquirer Corp. is trading at $50 a share and has 3 million shares outstanding. Acquirer...

A planned factory expansion project has an estimated initial cost of $800,000. Based on a discount rate of 20%, the present value of the future cost savings from the expansion is $843,000. To yield...

A planned factory expansion project has an estimated initial cost of $710,000. Based on a discount rate of 20 percent, the present value of the future cost savings from the expansion is $849,000. To...

NPV A planned factory expansion project has an estimated initial cost of $800,000. Based on a discount rate of 20 percent, the present value of the future cost savings from the expansion is $843,000....

A planned factory expansion project has an estimated initial cost of $700,000. Based on a discount rate of 20 percent, the present value of the future cost savings from the expansion is $846,000. To...

QUESTION 41 Calculate margin of safety using the following assumptions 500 300 ales Price per unit riable cost per unit xed Costs in total ctual Sales Volume 50 units 1,000 units O S500,000 1,750...

46. A planned factory expansion project has an estimated initial cost of $500,000. Using a discount rate of 20 percent, the present value of the future cost savings from the expansion is $520,000. To...

. Exercise 8-10 NPV A planned factory expansion project has an estimated initial cost of $800,000. Based on adiscount rateof 20 percent, the present value of the future cost savings from the...

Write the converse and the contrapositive to the following statements. (a) If the measure of angle ABC is 45, then angle ABC is an acute angle. (b) If a

CashMoney Corp. currently has 10 million shares of stock and zero debt. It generates expected free cash flow of $30M in perpetuity (recall: free cash flow = EBIT x (1-tax rate)). It's beta is 1, the...

Which concept / principle supports the notion that for companies reperting their financlal statements in United States dollars, no adjustments are made for the effects of inflation? Accrual Going...

Rectify the following errors and ascertain the amount of difference in trial balance by preparing suspense account : (a) Credit sales to Mohan Rs. 7,000 were not posted. (b) Credit purchases from...

Bernies Bears, Inc., manufactures plush toys in a facility in Cleveland, Ohio. Recently, the company designed a group of collectible resin figurines to go with the plush toy line. Management is...

Opportunity costs. (H. Schaefer) The Wild Boar Corporation is working at full production capacity producing 13,000 units of a unique product, Rosebo. Manufacturing cost per unit for Rosebo is as...

Product mix, special order. (N. Melumad, adapted) Pendleton Engineering makes cutting tools for metalworking operations. It makes two types of tools: R3, a regular cutting tool, and HP6, a...

You are considering two different methods of constructing a new warehouse. The first method uses prefabricated building segments, would have an initial cost of $4.8 million, would have annual...

The portfolio of a risk-free asset and a risky asset has a better risk-return trade-off than investing in only one asset type because the correlation between the risk-free asset and the risky asset...

You sold your house in 2 0 2 0 for an amount equal to 8 times your original purchase price in 1 9 8 0 . What was the annual growth rate ( in % ) of the home price? To nearest 0 . 0 1 %