Expert answer:Question and Problem Sets 3
Solved by verified expert:Purpose of AssignmentStudents should understand and be able to calculate the net present value and internal rate of return for corporate cash flows, determine project cash flows and a company’s sales, variable costs, fixed costs, and its breakeven point.Assignment Steps Resources: Tutorial help on Excel® and Word® functions can be found on the Microsoft®Office website. There are also additional tutorials via the web that offer support for office products. Complete the following Questions and Problems from each chapter as indicated. Show all work and analysis. Prepare in Microsoft® Excel® or Word. Ch. 9: Questions 7 & 8 (Questions and Problems section)Ch. 10: Questions 3 & 13 (Questions and Problems section)Ch. 11: Questions 1 & 7 (Questions and Problems section)Format your assignment consistent with APA guidelines if submitting in Microsoft® Word.Attached is a copy of the questions
week_3_questions.docx
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QUESTIONS
3. Calculating Projected Net Income [LO1] A proposed new investment has projected sales of
$635,000. Variable costs are 44 percent of sales, and fixed costs are $193,000; depreciation is $54,000.
Prepare a pro forma income statement assuming a tax rate of 35 percent. What is the projected net
income?
13. Project Evaluation [LO1] Dog Up! Franks is looking at a new sausage system with an installed cost
of $540,000. This cost will be depreciated straight-line to zero over the project’s five-year life, at the end
of which the sausage system can be scrapped for $80,000. The sausage system will save the firm
$170,000 per year in pretax operating costs, and the system requires an initial investment in net working
capital of $29,000. If the tax rate is 34 percent and the discount rate is 10 percent, what is the NPV of
this project?
1. Calculating Costs and Break-Even [LO3] Night Shades, Inc. (NSI), manufactures biotech
sunglasses. The variable materials cost is $9.64 per unit, and the variable labor cost is $8.63 per
unit.
a. What is the variable cost per unit?
b. Suppose NSI incurs fixed costs of $915,000 during a year in which total production is
215,000 units. What are the total costs for the year?
c. If the selling price is $39.99 per unit, does NSI break even on a cash basis? If depreciation
is $465,000 per year, what is the accounting break-even point?
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