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Project - B AC 505

Project - B AC 505 - A B 1 2 3 4 Data 5 6 7 8 9 10 11 12 13...

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Data: Cost to produce Annual cost of direct material: Varaiable cost Total Total annual production costs Annual cost to purchase cans Part 2 Payback Period Annual cost of direct labor for new employees: Part 1 Cash flows over the life of the project A B C 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49

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Part 3 Annual rate of return Part 4 Net Present Value Accounting income as result of decreased costs Part 5 Internal Rate of Return Excel Function method to calculate IRR IRR Factor = Invstment reqd/ annual net cash inflow = 200000/58351=3.4275 PV from tble 14B-2 @14%=3.433 A B C 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 93 94 95 96 97
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 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

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