A company is able to sell 50 000 cans of deodorant per year for the next three years at a price of R4.00 per can. The va
Posted: Wed May 18, 2022 10:49 pm
A company is able to sell 50 000 cans of deodorant per year for
the next three years at a price of R4.00 per can. The variable cost
per unit is R2.50 while it required R50 000 in research and
development to develop the product. The fixed costs associated with
the project are R12 000 while the equipment will cost R90 000
including installation costs. An initial outlay of R20 000 will be
required for working capital. The equipment will be depreciated
using the straight line method over three years and has a salvage
value of R20 000. The company’s tax rate is 40% while the cost of
capital is 20%. 1.1 What are the associated cash flows for the
project? [15 Marks] 1.2 Calculate the payback period, accounting
rate of return, IRR, NPV and profitability index associated with
the project [15 Marks]
the next three years at a price of R4.00 per can. The variable cost
per unit is R2.50 while it required R50 000 in research and
development to develop the product. The fixed costs associated with
the project are R12 000 while the equipment will cost R90 000
including installation costs. An initial outlay of R20 000 will be
required for working capital. The equipment will be depreciated
using the straight line method over three years and has a salvage
value of R20 000. The company’s tax rate is 40% while the cost of
capital is 20%. 1.1 What are the associated cash flows for the
project? [15 Marks] 1.2 Calculate the payback period, accounting
rate of return, IRR, NPV and profitability index associated with
the project [15 Marks]