XYZ Corporation is considering an expansion project. To date they have spent $64
ID: 2639301 • Letter: X
Question
XYZ Corporation is considering an expansion project. To date they have spent $64,900 investigating the viability of the project and have decided to proceed. The CEO of XYZ spent $21,700 last year on his business trip to New York where he discussed about the proposed new project with the board members. The company spent $53,500 on a marketing study before its current analysis regarding whether to accept or reject the project. The proposed project will cost $892,000.00. It will also cost additional $11,100.00 for shipping and installation. The project will be depreciated over a 3 year MACRS class life. XYX would use the 3-year MACRS method to depreciate the machine and equipment which are 33.33%, 44.45%, 14.81%, and 7.41%.
If the project is undertaken the company will need to increase its inventories by $39,000, and its accounts payable will rise by $11,000. The company will realize an additional $912,450.00 in sales over each of the next three years. The company
Explanation / Answer
the project cost= $903,000
the company revenue for each year= $912,450 (5.45 growth for next 3 years)
operating cost= $396,791 (5.45% growth for next 3 years)
NPV= $379,439
year revenue cost gross margin depreciation net margin PV@14.25 after tax 1 912,450 391,791 520659 297,303 223,356 195,497 121209 2 962,178 413,143 549,035 396494 152,541 116,862 72455 3 1,014,617 435,660 578,957 132,105 446,852 299,636 185,775Related Questions
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