Wildhorse Computer Devices Inc. is considering the introduction of a new printer. The company's accountant had prepared an analysis computing the target unit cost but misplaced his working papers. From memory he remembers the estimated unit sales price was $244 and the target unit cost was $236. Sales were projected at 100,000 units with a required $5,000,000 investment.
Compute the required minimum rate of return.
Minimum rate of return
Thunder Corporation, an amusement park, is considering a capital investment in a new exhibit. The exhibit would cost $204,969 and have an estimated useful life of 12 years. It can be sold for $69,200 at the end of that time. (Amusement parks need to rotate exhibits to keep people interested.) It is expected to increase net annual cash flows by $26,300. The company's borrowing rate is 8%. Its cost of capital is 10%.
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Calculate the net present value of this project to the company and determine whether the project is acceptable. (If the net present value is negative, use either a negative sign preceding the number eg -45 or parentheses eg (45). For calculation purposes, use 5 decimal places as displayed in the factor table provided. Round present value answer to 0 decimal places, e.g. 125.)
