Zoomz Video wants to introduce a new product line but must buy the new machine to produce
Question:
Zoomz Video wants to introduce a new product line but must buy the new machine to produce the product at a cost of $100,000. The machine will be depreciated straight line over its 5 year life to a $0 salvage value. The machine will be sold in year 5 for $500 in scrap metal
The new machine will produce 1,000 units each year over its 5 year life at a sale price of $100.00. Variable Costs are 25% of sales and fixed overhead is $35,000 per year.
The company is in the 25% corporate tax bracket and has a discount rate of 10%. If the company were to reinvest cash flows from the project each year, it would invest in an account that invests in Treasuries that yield 4%.
Calculate the following and show ALL WORK
a/payback
b/discounted payback period
c/Net Present Value
d/Profitability Index
e/IRR
f/MIRR
Automation Production Systems and Computer Integrated Manufacturing
ISBN: 978-0132393218
3rd edition
Authors: Mikell P.Groover