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There are five parts in total for this one problem; each part is on a separate
worksheet except parts c & e are together on the same worksheets
comprehensive chapter 12 & 13 problems
monarch corporation is going to start a new product line of products in a whole new market.
the data for analysis is presented below:[there are four worksheets for the solutions]
cost of the equipment needed $ 1,94,000 five year property for tax depreciation
new working capital needs $ 50,000 will be recovered at the end of the third year
projected new revenues:
sales probability
$ 2,00,000 30%
$ 2,50,000 50%
$ 3,00,000 20%
cost of good sold 30% of sales
variable cash costs 10% of sales
annual fixed cash costs:
rent $ 50,000
cleaning $ 20,000
mainenance & other $ 10,000
total fixed costs $ 80,000
equipment disposal proceeds $ 19,400 salvage value at the end of year 6
cost of capital 12.00%
tax rate 35% when computing tax a net loss for the year creates a positive tax savings
depreciation rates for tax purposes:
year one 20.00% 40
year two 32.00%
year three 19.20%
year four 11.50%
year five 11.50%
year six 5.80%
required:
a. compute below the payback, irr, and npv. for npv use the cost of capital as the discount rate.
for part a assume the revenue is $200,000.
b. copy the worksheet and solutions for part a to the worsheet part b, and redo the computations
for a revenue of $250,000
c. copy the worksheet and solutions for part a to the worsheet part c, and redo the computations
for a revenue of $300,000. list the three npvs and compute the expected npv. indicate whether
monarch should do the project? if so why? if not why?
d. take the irrs caculated for the three different levels of revenue and compute the mean (expected
return, standard deviation, and coefficient of variation given the probabilities for the three
different irrs. remember you can list the irrs based on how often they will occur, 3, 5, or 2
f. based on the results for part d, assume the discount rate to compute npv is based on the
following:
coefficient disc rate
there are five parts in total for this one problem; each part is on a separate
worksheet except parts c & e are together on the same worksheets
comprehensive chapter 12 & 13 problems
monarch corporation is going to start a new product line of products in a whole new market.
the data for analysis is presented below:[there are four worksheets for the solutions]
cost of the equipment needed $ 1,94,000 five year property for tax depreciation
new working capital needs $ 50,000 will be recovered at the end of the third year
projected new revenues:
sales probability
$ 2,00,000 30%
$ 2,50,000 50%
$ 3,00,000 20%
cost of good sold 30% of sales
variable cash costs 10% of sales
annual fixed cash costs:
rent $ 50,000
cleaning $ 20,000
mainenance & other $ 10,000
total fixed costs $ 80,000
equipment disposal proceeds $ 19,400 salvage value at the end of year 6
cost of capital 12.00%
tax rate 35% when computing tax a net loss for the year creates a positive tax savings
depreciation rates for tax purposes:
year one 20.00% 40
year two 32.00%
year three 19.20%
year four 11.50%
year five 11.50%
year six 5.80%
required:
a. compute below the payback, irr, and npv. for npv use the cost of capital as the discount rate.
for part a assume the revenue is $200,000.
b. copy the worksheet and solutions for part a to the worsheet part b, and redo the computations
for a revenue of $250,000
c. copy the worksheet and solutions for part a to the worsheet part c, and redo the computations
for a revenue of $300,000. list the three npvs and compute the expected npv. indicate whether
monarch should do the project? if so why? if not why?
d. take the irrs caculated for the three different levels of revenue and compute the mean (expected
return, standard deviation, and coefficient of variation given the probabilities for the three
different irrs. remember you can list the irrs based on how often they will occur, 3, 5, or 2
.
f. based on the results for part d, assume the discount rate to compute npv is based on the
following:
there are five parts in total for this one problem; each part is on a separate
worksheet except parts c & e are together on the same worksheets
comprehensive chapter 12 & 13 problems
monarch corporation is going to start a new product line of products in a whole new market.
the data for analysis is presented below:[there are four worksheets for the solutions]
cost of the equipment needed $ 1,94,000 five year property for tax depreciation
new working capital needs $ 50,000 will be recovered at the end of the third year
projected new revenues:
sales probability
$ 2,00,000 30%
$ 2,50,000 50%
$ 3,00,000 20%
cost of good sold 30% of sales
variable cash costs 10% of sales
annual fixed cash costs:
rent $ 50,000
cleaning $ 20,000
mainenance & other $ 10,000
total fixed costs $ 80,000
equipment disposal proceeds $ 19,400 salvage value at the end of year 6
cost of capital 12.00%
tax rate 35% when computing tax a net loss for the year creates a positive tax savings
depreciation rates for tax purposes:
year one 20.00% 40
year two 32.00%
year three 19.20%
year four 11.50%
year five 11.50%
year six 5.80%
required:
a. compute below the payback, irr, and npv. for npv use the cost of capital as the discount rate.
for part a assume the revenue is $200,000.
b. copy the worksheet and solutions for part a to the worsheet part b, and redo the computations
for a revenue of $250,000
c. copy the worksheet and solutions for part a to the worsheet part c, and redo the computations
for a revenue of $300,000. list the three npvs and compute the expected npv. indicate whether
monarch should do the project? if so why? if not why?
d. take the irrs caculated for the three different levels of revenue and compute the mean (expected
return, standard deviation, and coefficient of variation given the probabilities for the three
different irrs. remember you can list the irrs based on how often they will occur, 3, 5, or 2
.
f. based on the results for part d, assume the discount rate to compute npv is based on the
following:
comprehensive chapter 12 & 13 problems
monarch corporation is going to start a new product line of products in a whole new market.
the data for analysis is presented below:[there are four worksheets for the solutions]
cost of the equipment needed $ 1,94,000 five year property for tax depreciation
new working capital needs $ 50,000 will be recovered at the end of the third year
projected new revenues:
sales probability
$ 2,00,000 30%
$ 2,50,000 50%
$ 3,00,000 20%
cost of good sold 30% of sales
variable cash costs 10% of sales
annual fixed cash costs:
rent $ 50,000
cleaning $ 20,000
mainenance & other $ 10,000
total fixed costs $ 80,000
equipment disposal proceeds $ 19,400 salvage value at the end of year 6
cost of capital 12.00%
tax rate 35% when computing tax a net loss for the year creates a positive tax savings
depreciation rates for tax purposes:
year one 20.00% 40
year two 32.00%
year three 19.20%
year four 11.50%
year five 11.50%
year six 5.80%
required:
a. compute below the payback, irr, and npv. for npv use the cost of capital as the discount rate.
for part a assume the revenue is $200,000.
b. copy the worksheet and solutions for part a to the worsheet part b, and redo the computations
for a revenue of $250,000
c. copy the worksheet and solutions for part a to the worsheet part c, and redo the computations
for a revenue of $300,000. list the three npvs and compute the expected npv. indicate whether
monarch should do the project? if so why? if not why?
d. take the irrs caculated for the three different levels of revenue and compute the mean (expected
return, standard deviation, and coefficient of variation given the probabilities for the three
different irrs. remember you can list the irrs based on how often they will occur, 3, 5, or 2
.
f. based on the results for part d, assume the discount rate to compute npv is based on the
following:
coefficient disc rate