Van Doren Corporation is considering producing a new product, autodial. Marketing data indicate that the company will be able to sell 55,000 units per year at $30. The product will be produced in a section of an existing factory that is currently not in use.
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WRITE MY ESSAYTo produce autodial, Van Doren must buy a machine that costs $450,000. The machine has an expected life of 5 years and will have an ending residual value of $20,000. Van Doren will depreciate the machine over 5 years using the straight-line method for both tax and financial reporting purposes.
In addition to the cost of the machine, the company will incur incremental manufacturing costs of $440,000 for component parts, $484,000 for direct labor, and $247,500 of miscellaneous costs. Also, the company plans to spend $150,000 annually to advertise autodial. Van Doren has a tax rate of 40 percent, and the company’s required rate of return is 14 percent.
What is the Net Present Value: (Calculate using 4 decimal points)
Van Doren Corporation is considering producing a new product, autodial. Marketing data indicate that the company will be able to sell 55,000 units per year at $30. The product will be produced in a section of an existing factory that is currently not in use.
To produce autodial, Van Doren must buy a machine that costs $450,000. The machine has an expected life of 5 years and will have an ending residual value of $20,000. Van Doren will depreciate the machine over 5 years using the straight-line method for both tax and financial reporting purposes.
In addition to the cost of the machine, the company will incur incremental manufacturing costs of $440,000 for component parts, $484,000 for direct labor, and $247,500 of miscellaneous costs. Also, the company plans to spend $150,000 annually to advertise autodial. Van Doren has a tax rate of 40 percent, and the company’s required rate of return is 14 percent.
What is the Net Present Value: (Calculate using 4 decimal points)
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