AC505_Project-Solution(1) - AC505 - Washington, Nathan...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
AC505 - Washington, Nathan D03472951 Capital Budgeting Problem Data: Cost of new equipment $200,000 Expected life of equipment in years 5 Disposal value in 5 years $40,000 Life production - number of cans 5,500,000 Annual production or purchase needs 1,100,000 Initial training costs - Number of workers needed 3 Annual hours to be worked per employee 2000 Earnings per hour for employees $12.00 Annual health benefits per employee $2,500 Other annual benefits per employee-% of wages 18% Cost of raw materials per can $0.25 Other variable production costs per can $0.05 Costs to purchase cans - per can $0.45 Required rate of return 12% Tax rate 35% Make Purchase Cost to produce Annual cost of direct material: Need of 1,000,000 cans per year $330,000 Annual cost of direct labor for new employees: Wages $72,000 Health benefits $7,500 Other benefits $12,960 Total wages and benefits $92,460 Total annual production costs $422,460 Annual cost to purchase cans $495,000 Part 1 Cash flows over the life of the project
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 11/15/2010 for the course ACCOUNTING AC505 taught by Professor Seegmiller during the Spring '10 term at DeVry Denver.

Page1 / 2

AC505_Project-Solution(1) - AC505 - Washington, Nathan...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online