a. Compute annual rate of return, Pay back periodb NPV using 14% discounts rate , Is the Project acceptable using this discount rate Compute NPV using 11% discounts rate. Is the Project acceptable using this discount rate Project 1:A furniture maker who manufactures desk chairs has an opportunity to begin making a new type of chair, which hasadditional features from the models they currently make. To manufacture the required parts for the new models, thecompany will need new machinery. Because of the risk level involved in taking on a new product, management is trying todetermine whether the returns will justify the risk. Members of management are evaluating the project and have determined a|14% discount rate is appropriate for evaluation purposes. To aid management in their decision-making process, yoursupervisor has asked you to prepare an analysis of the project giving the following information and assumptions:The new equipment will have a cost of $364,000, a salvage value of$12,000 and a 10-year useful life. Straight line depreciation will be used.1)The projected revenues, costs, and results for each of the 10 years ofthis project are as follows:2)Sales$306,000Less:Manufacturing costsDepreciationShipping costsAdministrative costs$192,00035,20015,00016,500258,700Income before income taxes47,300Income tax expense18,920Net income$28,380

Information Provided: Discount Rate = 14%, 11% Cost of equipment = $364,000 Salvage value = $12,000…

Compute annual rate of return, Pay back period b NPV using 14% discounts rate , Is the Project acceptable using this discount rate Compute NPV using 11% discounts rate. Is the Project acceptable using this discount rate

Compute annual rate of return, Pay back period b NPV using 14% discounts rate , Is the Project acceptable using this discount rate Compute NPV using 11% discounts rate. Is the Project acceptable using this discount rate

Essentials of Business Analytics (MindTap Course List)

2nd Edition

ISBN:9781305627734

Author:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson

Publisher:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson

Chapter15: Decision Analysis

Section: Chapter Questions

Problem 2P: Southland Corporation’s decision to produce a new line of recreational products resulted in the need...

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