Windsor, a company that makes new furniture that has a worn look to it, has been...

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Windsor, a company that makes new furniture that has a worn look to it, has been struggling to keep up with its competitors. But the intern Igor has an idea: make some up-front investments in order to get customers' attention and then reap the rewards of a better product with a higher selling price. Since he's been studying capital budgeting at school, he's confident that he can present his idea and impress his boss with his insight and technical expertise. Here's the plan: • The new equipment and technology will have a useful life of 8 years, after which the assets will have no market value. Invest $146,000 in updated equipment and inventory management technology to support the production of zero-defect products, where custom features can be reasonably added to any order on demand. (a) Before pulling his proposal together, Igor finds out that the company is typically subject to a 24% tax rate. Further, the company has alternative uses for its cash that would easily earn a 6% rate of return. Click here to view the factor table The assets will generate additional net cash inflows due to higher gross margins of $60,300 per year for the life of the assets, less additional operating cash outflows of $29,400 per year for persistent marketing efforts. Your answer is correct. Is Igor's plan financially viable? Determine the NPV of this proposal and explain what it means if your answer is either a negative or a positive amount. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and final answer to 2 decimal places e.g. 5,125.36. Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) (b) NPV $ 27029.69 The planned investment looks financially viable. The NPV is positive, which implies that the company will earn greater than a 6% return on the investment. eTextbook and Media Attempts: 1 of 5 used Your answer is partially correct. Determine the exact IRR for this investment. (Round answer to 2 decimal places e.g. 15.25%.) Windsor, a company that makes new furniture that has a worn look to it, has been struggling to keep up with its competitors. But the intern Igor has an idea: make some up-front investments in order to get customers' attention and then reap the rewards of a better product with a higher selling price. Since he's been studying capital budgeting at school, he's confident that he can present his idea and impress his boss with his insight and technical expertise. Here's the plan: • The new equipment and technology will have a useful life of 8 years, after which the assets will have no market value. Invest $146,000 in updated equipment and inventory management technology to support the production of zero-defect products, where custom features can be reasonably added to any order on demand. (a) Before pulling his proposal together, Igor finds out that the company is typically subject to a 24% tax rate. Further, the company has alternative uses for its cash that would easily earn a 6% rate of return. Click here to view the factor table The assets will generate additional net cash inflows due to higher gross margins of $60,300 per year for the life of the assets, less additional operating cash outflows of $29,400 per year for persistent marketing efforts. Your answer is correct. Is Igor's plan financially viable? Determine the NPV of this proposal and explain what it means if your answer is either a negative or a positive amount. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and final answer to 2 decimal places e.g. 5,125.36. Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) (b) NPV $ 27029.69 The planned investment looks financially viable. The NPV is positive, which implies that the company will earn greater than a 6% return on the investment. eTextbook and Media Attempts: 1 of 5 used Your answer is partially correct. Determine the exact IRR for this investment. (Round answer to 2 decimal places e.g. 15.25%.)

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Step 11 Depreciation expanses146000818250 Tax saving on Depre... View the full answer