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ACC- Dunay Corporation is considering investing $790,000 in a project




Question;Q1.Dunay Corporation;is considering investing $790,000 in a project. The life of the project would;be 6 years. The project would require additional working capital of $29,000;which would be released for use elsewhere at the end of the project. The;annual net cash inflows would be $168,000. The salvage value of the assets;used in the project would be $39,000. The company uses a discount rate of;13%. (Ignore income taxes.);Click here to;viewExhibit 13B-1 andExhibit 13B-2 to determine the appropriate discount;factor(s) using tables.;Required;Compute the net present;value of the project.(Negative amount should be indicated by a minus sign. Round;discount factor(s) to 3 decimal places, intermediate and final answers to the;nearest dollar amount. Omit the "$" sign in your response.);Net;present value;$;Q2.Tranter, Inc., is;considering a project that would have a nine-year life and would require a;$3,300,000 investment in equipment. At the end of nine years, the project;would terminate and the equipment would have no salvage value. The project;would provide net operating income each year as follows: (Ignore income;taxes.);Sales;$;2,700,000;Variable;expenses;1,700,000;Contribution;margin;1,000,000;Fixed;expenses;Fixed;out-of-pocket cash expenses;$;400,000;Depreciation;260,000;660,000;Net;operating income;$;340,000;Click here to;viewExhibit 13B-2;to determine the appropriate discount factor(s) using tables.;All of the above;items, except for depreciation, represent cash flows. The company's required;rate of return is 10%.;Required;a.;Compute the project's;net present value. (Negative amount;should be indicated by a minus sign. Round discount factor(s) to 3 decimal;places, intermediate and final answers to the nearest dollar amount. Omit the;$" sign in your response.);Net;present value;$;b.;Compute the project's;internal rate of return.(Round discount factor(s) to 3 decimal places and final answer to;the closest interest rate. Omit the "%" sign in your;response.);Internal;rate of return;%;c.;Compute the project's;payback period.(Round;your answer to 1 decimal place.);Payback;period;years;d.;Compute the project's;simple rate of return.(Round your final answer to the closest interest rate. Omit the;%" sign in your response.);Simple;rate of return;%


Paper#42727 | Written in 18-Jul-2015

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