A turnkey contract for a factory machinery equipment was tendered for 25 thousand USD. In addition, 5
Question:
A turnkey contract for a factory machinery equipment was tendered for 25 thousand USD. In addition, 5 thousand liras was paid for the land for the factory site and 16 thousand USD was paid for the factory buildings. The economic life of the factory is 10 years and it has no scrap value. The annual market demand of the product to be produced is estimated to be 2500 on average. The sales price and cost information of the product are as follows.
Sales price 10 USD/unit,
Costs (USD/unit)
Raw material 2,
Labor 1.5,
Management 0.2,
Marketing 0.15,
Finance 0.1
General operating expenses 1
Energy expenses 0.11.
In order to simplify the calculations, assuming that 25 thousand USD paid for machinery and equipment is subject to depreciation (with a scrap value of 3 thousand) and will be recovered in 10 years, pay 30% income tax and the cost of capital is 25%;
a) What is the unit commercial cost of the product to be produced?
b) Calculate the project cash flow by years.
Financial Accounting
ISBN: 978-0078025549
3rd edition
Authors: J. David Spiceland, Wayne Thomas, Don Herrmann