university of california Operations And Supply Chain Management Assignment Help - rate of return

Question - Tranter, Inc., is considering a project that would have a seven-year life and would require a
$1,260,000 investment in equipment. At the end of seven years, the project would terminate and the
equipment would have no salvage value. The project would provide net operating income each year
as follows: (Ignore income taxes.)

Sales $ 2,000,000
Variable expenses 1,350,000

Contribution margin 650,000
Fixed expenses:
Fixed out-of-pocket cash
expenses $ 300,000
Depreciation 130,000 430,000

Net operating income $ 220,000







Click here to view Exhibit 13B-2, to determine the appropriate discount factor(s) using tables.

All of the above items, except for depreciation, represent cash flows. Th ...Read More e company's required rate of
return is 11%.

Required:
a.
Compute the project's net present value. (Negative amount should be indicated by a minus
sign. Round discount factor(s) to 3 decimal places, intermediate and final answers to the
nearest dollar amount. Omit the "$" sign in your response.)

Net present value $

b. Compute the project's internal rate of return. (Round discount factor(s) to 3 decimal places
and final answer to the closest interest rate. Omit the "%" sign in your response.)

Internal rate of return %

c. Compute the project's payback period. (Round your answer to 1 decimal place.)

Payback period years

d. Compute the project's simple rate of return. (Round your final answer to the closest interest
rate. Omit the "%" sign in your response.)

Simple rate of return % ...Read Less

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