Corporation developed a new product that it believes will have broad market appeal. The company’s recent cost and

[ad_1]

Corporation developed a new product that it believes will have broad market appeal. The company’s recent cost and

Don't use plagiarized sources. Get Your Custom Essay on
Corporation developed a new product that it believes will have broad market appeal. The company’s recent cost and
Just from $13/Page
Order Essay

marketing studies revealed the following:

a. New equipment costing $360,000 would need to be acquired to produce the product. The equipment is estimated to have a six-year useful life, with no salvage value at the end of the six years.

b. Sales in units over the next six years are projected as follows:

Year 1-20,000

Year 2-30,000

Year 3-50,000

Years 4-6 – 60,000

Production and sales of the new product would require working capital of $450,000 to finance accounts receivable, inventory, and day-to-day cash needs. This working capital would be released at the end of the project’s life.

c. The product would sell for $35 each; variable costs for production, administration, and sales would be $22 per unit.

d. Fixed costs would total $240,000 per year. These fixed costs are for salaries, maintenance, property taxes, insurance, and straight-line depreciation on the new equipment (see item a. above). Note that the annual depreciation on the new equipment referenced in item a. above is on a straight-line basis over the six-year life.

e. To gain rapid entry into the market, the company would need to advertise heavily. The advertising program would be:

Year 1-2 – $200,000

Year 3 – $180,000

Years 4-6 – $120,000

f. The company’s required rate of return is 20%. Ignore taxes.

Please show how came to this answer

1. Determine the net present value of the investment, construct a schedule that shows the calculation of cash flows for the current year and for years 1 through 6. Then, calculate the NPV assuming a discount factor of 20%. Ignore taxes.

2. Would recommend that John Corporation accept the new product in its product line? Why or why not?



[ad_2]

Source link

Place your order
(550 words)

Approximate price: $22

Calculate the price of your order

550 words
We'll send you the first draft for approval by September 11, 2018 at 10:52 AM
Total price:
$26
The price is based on these factors:
Academic level
Number of pages
Urgency
Basic features
  • Free title page and bibliography
  • Unlimited revisions
  • Plagiarism-free guarantee
  • Money-back guarantee
  • 24/7 support
On-demand options
  • Writer’s samples
  • Part-by-part delivery
  • Overnight delivery
  • Copies of used sources
  • Expert Proofreading
Paper format
  • 275 words per page
  • 12 pt Arial/Times New Roman
  • Double line spacing
  • Any citation style (APA, MLA, Chicago/Turabian, Harvard)

Our guarantees

Delivering a high-quality product at a reasonable price is not enough anymore.
That’s why we have developed 5 beneficial guarantees that will make your experience with our service enjoyable, easy, and safe.

Money-back guarantee

You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.

Read more

Zero-plagiarism guarantee

Each paper is composed from scratch, according to your instructions. It is then checked by our plagiarism-detection software. There is no gap where plagiarism could squeeze in.

Read more

Free-revision policy

Thanks to our free revisions, there is no way for you to be unsatisfied. We will work on your paper until you are completely happy with the result.

Read more

Privacy policy

Your email is safe, as we store it according to international data protection rules. Your bank details are secure, as we use only reliable payment systems.

Read more

Fair-cooperation guarantee

By sending us your money, you buy the service we provide. Check out our terms and conditions if you prefer business talks to be laid out in official language.

Read more

Order your essay today and save 15% with the discount code BANANA