MannyRaw55

07.04.2020 • 

Business

Revenues generated by a new fad product are forecast as follows:

Year Revenues
1 $54,000
2 30,000
3 20,000
4 10,000
Thereafter 0

Expenses are expected to be 50% of revenues, and working capital required in each year is expected to be 10% of revenues in the following year. The product requires an immediate investment of $50,000 in plant and equipment.

a. What is the initial investment in the product? Remember working capital.

Initial investment $

b.

If the plant and equipment are depreciated over 4 years to a salvage value of zero using straight-line depreciation, and the firm’s tax rate is 30%, what are the project cash flows in each year? Assume the plant and equipment are worthless at the end of 4 years. (Do not round intermediate calculations.)

Year Cash Flow
1 $
2
3
4

c.
If the opportunity cost of capital is 12%, what is the project's NPV? (A negative value should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 2 decimal places.)

NPV $

d.
What is project IRR? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

IRR %

Ответ:

nova97

03.10.2022

Business

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Options (a), (c) and (d)

Explanation:

Uncollectible accounts refer to those accounts receivables which have gone bad and doubtful and from whom the possibility of collection/recovery is next to nil. Some of the credit sales will always be uncollectible regardless of how carefully a company frames it's credit policies.

Uncollectible accounts are usually referred to as bad debts.

There are some indications which make an enterprise classify some accounts as uncollectible, some of which are:

1. The debtor is incurring heavy losses and on the verge of business shutdown.

2. The debtor stops responding to company's mails and calls and other means, seeking payment from him.

3. The debtor has gone bankrupt or insolvent and has filed for bankruptcy.

4. The debtor closes or shuts down his business operations.

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