Incremental Analysis and Capital Budgeting

Veronica Mars, a recent graduate of Bell's accounting program, evaluated the operating performance of Dunn Company's six divisions.

Cawley Company makes three models of tasers. Information on the three products is given below

Doug's Custom Construction Company is considering three new products, each requiring an equipment investment of $22,000. Each project will last for 3 years and produce the following net annual cash flows

Vilas Company is considering a capital investment of $90,000 in additional productive facilities. The new machinery is expected to have a useful life of 5 years with no salvage value. Depreciation is by the straight-line method. During the life of the investment, annual net income and net annual cash flows are expected to be $12,000 and $50,000, respectively. Vilas has a 12% cost of capital rate, which is the required rate of return on the investment.

Leung Corporation is considering investing in two different projects. It could invest in both, neither, or just one of the projects. The forecasts for the projects are as follows.

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