Cost Accounting - NPV - Please help answer the (1) blank Lawson Company is consi
ID: 2415893 • Letter: C
Question
Cost Accounting - NPV - Please help answer the (1) blank
Lawson Company is considering production of an electronic tablet with the following associated data:
(Will need to use a present value table)
• Expected annual revenues, $1,541,000. • A projected product life cycle of five years. • Equipment, $1,631,000 with a salvage value of $195,000 after five years. • Expected increase in working capital, $200,000 (recoverable at the end of five years). • Annual cash operating expenses are estimated at $868,000. • The required rate of return is 10 percent.Explanation / Answer
$ 1,068,000*0.621=$663,228
NPV =$-1,831.000+$2,132,737+ $663,228 =$964,965
Year Item Cash Flow 0 Equipment $ -1,631,000 Working capital -200,000 Total $ -1,831,000 *1 (PV) =$-1,831.000 1-4 Revenues $ 1,541,00 Operating expenses -868,000 Total $ 673,000 *3.169=$2,132,737 5 Revenues $ 1,541,000 Operating expenses -868,000 Salvage 195,000 Recovery of working capital 200,000 Total$ 1,068,000*0.621=$663,228
NPV =$-1,831.000+$2,132,737+ $663,228 =$964,965