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(solution) REAL DOG MANUFACTURING COMPANY HAS A NEW DOG FOOD CANNING MACHINE


REAL DOG MANUFACTURING COMPANY HAS A NEW DOG FOOD CANNING MACHINE WHICH COSTS $500,000.  SHIPPING AND  INSTALLATION AND TRAINING WILL ADD ANOTHER $100,000.  THE MACHINE HAS A 8 YEAR LIFE WITH A $0 SALVAGE VALUE. ASSUME INCREMENTAL PROFIT AFTER TAXES OF $50,000 PER YEAR AND IF THE COST OF CAPITAL IS 12%, CALCULATE PAYBACK, IROR AND NET PRESENT VALUE. ASSUME THAT THE COST OF INSTALLATION AND TRAINING IS WRITTEN OFF OVER THE LIFE OF THE EQUIPMENT. 


Cost

 

Shipping and installment

 

Total initial investment 500000

 

100000

 

600000 Depreciation per year = 75000 Calculating the cash flows

 

Profit after taxes

 

Add: Depreciation

 

Net cash flow 50000

 

75000...

 


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Sep 13, 2020

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