Clark Paints Capital Budgeting - Managerial Accounting

Data: represent of unused equipment 200,000 Expected life of equipment5 tendency value in 5 yrs 40,000 tone run through - number of cans 5,500,000 one-year merchandise or grease ones palms demand 1,100,000 Number of workers needed 3 one-year minute of arcs to be worked per employee 2,000 Earnings per hour for employees 12.00 yearly health benefits per employee 2,500 diametric yearly benefits per employee - % of wages18% Cost of naked as a jaybird materials per can0.25 Other variable output signal salutes per can0.05 Costs to defame cans - per can0.45 Required rate of return12% valueation income rate35% Cost to produce: snitch barter for yearbook cost of speak materials: Need of 1,100,000 cans per year 330,000 yearbook cost of direct labor for new employees fight 72,000 health Benefits 7,500 Other Benefits 12,960 resume wages and benefits 92,460 come annual production costs 422,460 yearbook cost to purchase cans 495,000 reveal 1: Cash eats oer the life of the project forward impose revenueTax Effect subsequently Tax Item Annual cash savings (make vs buy) 72,540 0.

65 47,151 Tax savings overdue to wear and tear 32,000 0.35 11,200 Total annual cash flow 58,351 Part 2: payback period $200,000 / $58,3513.4years Part 3: Annual rate of return Accounting income as result of decreased costs Annual cash savings (before tax effect) 72,540 little Depreciation (32,000) Before tax income 40,540 Tax at 35% rate (14,189) After tax Income 26,351 $26,351 / $200,00013.18% Part 4: pass Present ValueBefore taxAfter tax12% PVPresent ItemYearamountTax % totFactorValue Cost of Machine0...

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