TURRONES Company is now considering producing and selling a new product (for ever): A light 'Turron...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
TURRONES Company is now considering producing and selling a new product (for ever): A light 'Turron” (Spanish Almond Candy or Nougat, traditional Christmas treat in Spain) The production of this new "turron" requires the use of machinery from the company which is totally depreciated. The company was planning selling this machine at its book value, €5,600. Also, the production of this new "turron" requires buying a new machine. The cost of this new machine is €60,000, and it will be depreciated straight-line over 10 years, with no resale value. The company thinks that this new machinery can be used indefinitely. Estimated variable costs are €0.79 per unit and the estimated fixed costs are €10,000 per year. The company needs to hire workers to produce this new “turron”, which costs €60,000 per year. Selling price per unit will be €3 (constant). Traditionally, the company's publicity costs are €15,000 per year, and the board of directors think it is not necessary to increase them for the new "turron". However, the introduction of this new "turron" the market has some negative consequences for the older product of TURRONES. Older product's annual sales are expected to decrease by 3 units of “Traditional Jijona turron" per each 10 light "turron" sold. The maximum estimated production (and sales) for this new light “turron" is 45,000 units per year. The selling price of the older traditional “turron” is €2,25 per unit and its variable cost is €0.4 per unit (both keep constant). The fixed costs of the older traditional “turron" are €10,000 per year. Assuming: Tax rate is 35%. Taxes are paid the year incomes were generated. All sales and costs are in are in cash. Opportunity cost of capital of 15% Please, calculate the project Net Cash Flows after taxes. TURRONES Company is now considering producing and selling a new product (for ever): A light 'Turron” (Spanish Almond Candy or Nougat, traditional Christmas treat in Spain) The production of this new "turron" requires the use of machinery from the company which is totally depreciated. The company was planning selling this machine at its book value, €5,600. Also, the production of this new "turron" requires buying a new machine. The cost of this new machine is €60,000, and it will be depreciated straight-line over 10 years, with no resale value. The company thinks that this new machinery can be used indefinitely. Estimated variable costs are €0.79 per unit and the estimated fixed costs are €10,000 per year. The company needs to hire workers to produce this new “turron”, which costs €60,000 per year. Selling price per unit will be €3 (constant). Traditionally, the company's publicity costs are €15,000 per year, and the board of directors think it is not necessary to increase them for the new "turron". However, the introduction of this new "turron" the market has some negative consequences for the older product of TURRONES. Older product's annual sales are expected to decrease by 3 units of “Traditional Jijona turron" per each 10 light "turron" sold. The maximum estimated production (and sales) for this new light “turron" is 45,000 units per year. The selling price of the older traditional “turron” is €2,25 per unit and its variable cost is €0.4 per unit (both keep constant). The fixed costs of the older traditional “turron" are €10,000 per year. Assuming: Tax rate is 35%. Taxes are paid the year incomes were generated. All sales and costs are in are in cash. Opportunity cost of capital of 15% Please, calculate the project Net Cash Flows after taxes.
Expert Answer:
Answer rating: 100% (QA)
To calculate the net cash flows after taxes for the project we need to consider the revenues costs depreciation and tax implications Heres how we can ... View the full answer
Related Book For
Posted Date:
Students also viewed these finance questions
-
Holmes Corporation is a leading designer and manufacturer of material handling and processing equipment for heavy industry in the United States and abroad. Its sales have more than doubled, and its...
-
The Hampshire Company manufactures umbrellas that sell for $12.50 each. In 2014, the company made and sold 60,000 umbrellas. The company had fixed manufacturing costs of $216,000. It also had fixed...
-
On 1 June 1998, Alice bought a house in Derby for 45,000. - She occupied the house as her PPR until 1 May 2000 when she left to work in Exeter, living in rented accommodation. - She returned to the...
-
Marlene, a cash basis taxpayer, invests in Series EE U.S. government savings bonds and bank certificates of deposit (CDs). Determine the tax consequences of the following on her 2016 gross income: a....
-
Show that the chemical potentials A and B of the two atomic species A and B of an equilibrium two phase mixture are given by the intercepts of the two-point tangent in Figure with the vertical...
-
In a BBC documentary called Power to the People, Michael Portillo visited a You Decide session organized by the local council in Tower Hamlets, London. At this session, local people decide what is to...
-
China and India are emerging markets that will have a significant impact on the world in coming years. The term Chindia is used to describe the growing power of these two countries. In a small group,...
-
(in thousands, except per share amounts) Assets Current assets: February 1, 2020 February 2 2019 Cash and cash equivalents 361,930 $ 333,330 Short-term investments (available for sale) 55,000 92,135...
-
ECED 103 - Creative and Language Arts for Children Chart Template and Format Stage of Play Description of Stage of Play Benefit of Stage of Play Unoccupied Child is not engaged in play or does not...
-
A firm which named Beyonce is currently growing fast. Current risk free rate is 7%; however, since the firm is somewhat risky investors requires a risk premium. So the required rate of return for the...
-
Explain the terms required in Texas for an enforceable physician's noncompete provision.
-
Explain how each of these 4 strengths listed below, will enable a person to develop a healthy organisational compliance culture or aid in this development. The answer must provide an excellent...
-
A water supply system was designed to provide water for the domestic use of a small community from a reservoir with the surface elevation of the reservoir at 300 ft. (Neglect minor losse) Pipe A and...
-
How would a manager use economic theory to determine profit-maximizing price for a service or product? What is the process of target costing and how is target cost calculated?
-
Outline role of performance management in relation to broader human resources and business objectives.
-
The tractor is used to lift the 150-kg load B with the 24-mlong rope, boom, and pulley system. If the tractor travels to the right at a constant speed of 4 m/s, determine the tension in the rope when...
-
Virtually all students have heard of IKEA, but only a few will have ever visited an IKEA store. For that reason, it is a good idea to direct students to the IKEA website or an IKEA catalog prior to...
-
J.D. Power and Associates (www.jdpower.com) is a well-known research company specializing in the measurement of product quality and customer satisfaction. Explore their website to look at their...
-
This case provides a brief history of Apple and a review of its product line and marketing program. Apple has honed its ability to produce iconic products that consumers desire. The companys product...
-
Consider each of the following issues and discuss whether you support Theory X, Theory Y, neither theory, or some combination of them. Issue Theory X Theory Y Whether a person is healthy or sick...
-
Some people argue that the government should not intervene in the case of a market failure because the government itself is inefficient and will simply create new problems to replace the ones it is...
-
What are the benefits and drawbacks of having a health program that varies by state versus having one that is uniform across the country? Do you find that the positives of state flexibility outweigh...
Study smarter with the SolutionInn App