The following data have been collected by capital budgeting analysts at Sunset Beach Inc. concerning an investment
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2019 ..........$ 120,000
2020 ...........155,000
2021 .........195,000
2022 .........130,000 The new product line will also require an investment in inventory and receivables of $86,000; this investment will become available for other purposes at the end of the project. The salvage value of machinery and equipment at the end of the product line's life is expected to be $80,000. The cost of capital used in Sunset Beach's capital budgeting analysis is 14%. Required: Calculate the net present value of the proposed investment. Ignore income taxes. (Round final answers to nearest whole dollar amount. Negative amount should be indicated with a minus sign.) Calculate the present value ratio of the investment. (Round your answer to 2 decimal places.) What will the internal rate of return on this investment be relative to the cost of capital? Calculate the payback period of the investment. (Round your answer to 2 decimal places.) Based on the quantitative analysis, would you recommend that the product line expansion project be undertaken?
Related Book For
Accounting What the Numbers Mean
ISBN: 978-1260565492
12th edition
Authors: David Marshall, Wayne McManus, Daniel Viele
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