A company is planning to undertake an investment project. The following data have been calculated for two alternatives, A and B:A BInitial Investment outlay ($) 200,000 275,000 Freight charges 20,000 30,000 Set up charges 5,000 7,000 Economic Life (years) 10 10 Liquidation Value at end of economic life($) 12,000 17,000 Other fixed costs ($/yr) 4,000 20,000 Production and sales volume (units/year) 9,000 12,000 Sales Price ($/unit) 15 15 Variable costs ($/unit) 2.45 2.00 Rate of Interest (%/year) 6% 6% 1. Evaluate the projects using the Net Present Value.

A company is planning to undertake an investment project. The following data have been calculated for two alternatives, A and B:A BInitial Investment outlay ($) 200,000 275,000 Freight charges 20,000 30,000 Set up charges 5,000 7,000 Economic Life (years) 10 10 Liquidation Value at end of economic life($) 12,000 17,000 Other fixed costs ($/yr) 4,000 20,000 Production and sales volume (units/year) 9,000 12,000 Sales Price ($/unit) 15 15 Variable costs ($/unit) 2.45 2.00 Rate of Interest (%/year) 6% 6% 1. Evaluate the projects using the Net Present Value.

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter12: Capital Investment Analysis

Section: Chapter Questions

Problem 1PB

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A company is planning to undertake an investment project. The following data have been calculated for two alternatives, A and B:A BInitial Investment outlay ($) 200,000 275,000 Freight charges 20,000 30,000 Set up charges 5,000 7,000 Economic Life (years) 10 10 Liquidation Value at end of economic life($) 12,000 17,000 Other fixed costs ($/yr) 4,000 20,000 Production and sales volume (units/year) 9,000 12,000 Sales Price ($/unit) 15 15 Variable costs ($/unit) 2.45 2.00 Rate of Interest (%/year) 6% 6%1. Ascertain the preferred project using:a. The profit comparison method. b. The average rate of return method. c. The static payback method 2. Re-evaluate the projects using the Net Present Value. Are the results of the Project selection process the same? If different, what reasons can you offer?
A company is planning to undertake an investment project. The following data have been calculated for two alternatives, A and B: A B Initial Investment outlay ($) 200,000 275,000 Freight charges 20,000 30,000 Set up charges 5,000 7,000 Economic Life (years) 10 10 Liquidation Value at end of economic life($) 12,000 17,000 Other fixed costs ($/yr) 4,000 20,000 Production and sales volume (units/year) 9,000 12,000 Sales Price ($/unit) 15 15 Variable costs ($/unit) 2.45 2.00 Rate of Interest (%/year) 6% 6% 1. Ascertain the preferred project using: a. The profit comparison method. b. The average rate of return method. C. The static payback method
A company is planning to undertake an investment project. The following data have been calculated for two alternatives, A and B: A В Initial Investment outlay ($) 200,000 275,000 Freight charges 20,000 30,000 Set up charges 5,000 7,000 Economic Life (years) 10 10 Liquidation Value at end of economic life($) 12,000 17,000 Other fixed costs ($/yr) 4,000 20,000 Production and sales volume (units/year) 9,000 12,000 Sales Price ($/unit) 15 15 Variable costs ($/unit) 2.45 2.00 Rate of Interest (%/year) 6% 6% 1. Ascertain the preferred project using: a. The profit comparison method. . b. The average rate of return method. The static payback method C. Are the results of the Project selection process 2. Re-evaluate the projects using the Net Present Value. the same? If different, what reasons can you offer?
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