Skyline Walkways Ltd is planning a project that is expected to last for 8 years. The project requires a large piece of machinery to be purchased at a cost of $320,000, with a residual value of $14,000 at the end of the project. The project is expected to generate an annual net cash inflow of $85,000 per year. In addition to its annual operating costs, the machinery will require a major overhaul at the end of year 5 which is expected to cost $90,000. The company has a minimum desired rate of return of 15% on all project. The company accountant prepared the following analysis to present to the board which indicated that this project should be rejected, as it does not meet the company’s desired rate of return:Annual net cashflow,000Less:Annual depreciation$38,250Annual average cost of overhaul$11,250Average annual net profit$35,500Return on investment$35,500 / $320,000 = 11.1% I. Critically assess the accountant’s evaluation of the project. Fuo II. Use cash flow analysis to demine whether the project should be accepted. Ignore tax effects. III. Is the internal rate of return greater or less than 15%?
- RECOMMENDED!!ACC 317-Summarize the major benefits of forming a corporation
- RECOMMENDED!!ACCT 324-Drab Corporation, a calendar year S corporation,
- RECOMMENDED!!QNT 561 BUSSINESS-To prepare the statement of cash flows, accountants for Vinson
- RECOMMENDED!!MBA 641-Glass company manufactures glasses that it sells
- RECOMMENDED!!ACCT 151-Trego Company issued, on December 31, 2018