3. Calculating Projected Net Income 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 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?
Ch. 11: Questions 1 & 7( Questions and Problems section)
1. Calculating Costs and Break-Even 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?
7. Calculating Break-Even In each of the following cases, calculate the accounting break-even and the cash break-even points. Ignore any tax effects in calculating the cash break-even.