Answered: Initial investment $10,000,000 Income…

Initial investment $10,000,000 Income (annual) $3,000,000 Labor cost (annual) $400,000 Material cost (annual) $150,000 Maintenance cost (annual) $80,000 Utility cost (annual) $200,000

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter12: Capital Investment Analysis

Section: Chapter Questions

Problem 2BE

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Question

Your future company has been presented with an opportunity to invest in a project with the following cash flow for ten years. If the company would like to make at least 8% on its investment, would you invest in the project?

Initial investment
$10,000,000
Income (annual)
$3,000,000
Labor cost (annual)
$400,000
Material cost (annual)
$150,000
Maintenance cost (annual)
$80,000
Utility cost (annual)
$200,000

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