AC505_Project-Solution(1)

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

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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
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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.

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

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