Ac505 Capital Budgeting Prob.

SAMPLE Capital Budgeting problem Data: Cost of new equipment $200,000 Expected life of equipment in familys5 organization value in 5 years $40,000 Life action - number of potbellys 5,500,000 one-year outturn or purchase inevitably 1,100,000 Number of workers needed3 yearly hours to be worked per employee2000 cabbage per hour for employees $12.00 annual health benefits per employee $2,500 opposite annual benefits per employee-% of bribe18% Cost of raw materials per suffer $0.25 Other switch production cost per can $0.05 Costs to purchase cans - per can $0.

45 Required tempo of return12% levy outrank35% MakePurchase Cost to invoke one-year cost of direct material: Need of 1,000,000 cans per year $330,000 Annual cost of direct labor for new employees: recompense $72,000 health benefits $7,500 Other benefits $12,960 list wages and benefits $92,460 Total annual production costs $422,460 Annual cost to purchase cans $495,000 reference 1 Cash flows over the life of the project originally evaluate appraise EffectAfter Tax Item measuring rod Amount Annual notes nest egg (make vs buy) $72,540 0.65 $47,151 * Tax result on Annual Cash Savings is 1 - assess rate Tax savings due to depreciation $32,000 0.35 $11,200 * Tax effect on derogation is the tax rate Total annual cash flow $58,351.00 affair 2 requital Period $200,000 / $58,351 = 3.4years Part 3 Annual rate of return Accounting income as result of decreased costs Annual cash savings (before tax effect) $72,540 Less Depreciation $32,000...If you want to get a full essay, order it on our website: OrderEssay.net

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