Unformatted text preview: 10¢ per can. Since there is currently unused space in the factory, no additional fixed costs would be incurred if this proposal is accepted. It is expected that cans would cost 50¢ per can if purchased from the current supplier. The company's minimum rate of return (hurdle rate) has been determined to be 10% for all new projects, and the current tax rate of 35% is anticipated to remain unchanged. The pricing for a gallon of paint as well as number of units sold will not be affected by this decision. The unit-of-production depreciation method would be used if the new equipment is purchased. • Based on the above information and using Excel , calculate the following items for this proposed equipment purchase: 1. Annual cash flows over the expected life of the equipment 2. Payback period 3. Annual rate of return 4. Net present value 5. Internal rate of return • Would you recommend the acceptance of this proposal? Why or why not?...
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- Spring '10
- Net Present Value, $10,000, $40,000, $200,000, $1,500, $8.50