1) A company invests in a new project that requires an initial capital outlay of...
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Accounting
1) A company invests in a new project that requires an initial capital outlay of $852790. The project will generate annual net cash flows of $145612 over a period of 8 years. The after-tax cost of capital is 9%. In addition, a working capital outlay of $94620 will be required. This working capital outlay will be recovered at the end of the projects life.
What is the net present value of the project?
Select one:
a. $-141474
b. $-93987
c. $312106
d. $-46854
2) Data relating to Randall Ltd.s single product are as follows:
Selling price
$5.16
Direct materials
0.82
Direct labour
0.85
Overhead (60% fixed)
0.99
Gross Profit
$2.5
The company currently produces 56699 units.
Randall Ltd. is considering purchasing a new machine that is expected to decrease variable costs by 14%. The expected useful life of the new machine is 11 years.
Assuming a weighted average cost of capital of 8%, what is the net present value of the increase in contribution margin relating to this investment?
Select one:
a. $117076
b. $191826
c. $7034
d. There is a decrease in the contribution margin.
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