1. Winnebagel Corp. currently sells 45,000 motor homes per year at $67,500 each,
ID: 2789415 • Letter: 1
Question
1. Winnebagel Corp. currently sells 45,000 motor homes per year at $67,500 each, and 18,000 luxury motor coaches per year at $127,500 each. The company wants to introduce a new portable camper to fill out its product line; it hopes to sell 28,500 of these campers per year at $18,000 each. An independent consultant has determined that if Winnebagel introduces the new campers, it should boost the sales of its existing motor homes by 6,750 units per year, and reduce the sales of its motor coaches by 1,350 units per year
What is the amount to use as the annual sales figure when evaluating this project?
$836,325,000
$1,140,750,000
$756,675,000
$796,500,000
$513,000,000
2. Consider an asset that costs $316,800 and is depreciated straight-line to zero over its 9-year tax life. The asset is to be used in a 6-year project; at the end of the project, the asset can be sold for $39,600.
If the relevant tax rate is 31 percent, what is the aftertax cash flow from the sale of this asset? (Do not round your intermediate calculations.)
$57,057.00
$346,512.00
$27,324.00
$60,060.00
$63,063.00
3. Geary Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $720,000 is estimated to result in $240,000 in annual pretax cost savings. The press falls in the MACRS five-year class (MACRS Table), and it will have a salvage value at the end of the project of $105,000. The press also requires an initial investment in spare parts inventory of $30,000, along with an additional $4,500 in inventory for each succeeding year of the project.
If the shop's tax rate is 32 percent and its discount rate is 19 percent, what is the NPV for this project? (Do not round your intermediate calculations.)
$-121,588.54
$-118,690.94
$-183,779.07
$-127,667.97
$-115,509.11
4. Vandalay Industries is considering the purchase of a new machine for the production of latex. Machine A costs $2,280,000 and will last for 5 years. Variable costs are 34 percent of sales, and fixed costs are $134,000 per year. Machine B costs $4,600,000 and will last for 9 years. Variable costs for this machine are 26 percent of sales and fixed costs are $73,000 per year. The sales for each machine will be $9.2 million per year. The required return is 10 percent and the tax rate is 35 percent. Both machines will be depreciated on a straight-line basis.
If the company plans to replace the machine when it wears out on a perpetual basis, what is the EAC for machine A? (Do not round your intermediate calculations.)
If the company plans to replace the machine when it wears out on a perpetual basis, what is the EAC for machine B? (Do not round your intermediate calculations.)
1. Winnebagel Corp. currently sells 45,000 motor homes per year at $67,500 each, and 18,000 luxury motor coaches per year at $127,500 each. The company wants to introduce a new portable camper to fill out its product line; it hopes to sell 28,500 of these campers per year at $18,000 each. An independent consultant has determined that if Winnebagel introduces the new campers, it should boost the sales of its existing motor homes by 6,750 units per year, and reduce the sales of its motor coaches by 1,350 units per year
Explanation / Answer
1)
Portable camper sales $ 513,000,000 28500*18000 Add: Increase in sale of existing motor homes $ 455,625,000 6750*67500 Less: Decrease in sale of motor coaches $ 172,125,000 1350*127500 Total $ 796,500,000Related Questions
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