Clark Paints Capital Budgeting - Managerial Accounting

Data: apostrophize of bleak equipment 200,000 Expected life of equipment5 establishment value in 5 years 40,000 tone run through - number of cans 5,500,000 one-year production or grease ones palms unavoidably 1,100,000 Number of workers needed 3 one-year hours to be worked per employee 2,000 simoleons per hour for employees 12.00 annual health benefits per employee 2,500 different yearly benefits per employee - % of wages18% Cost of raw materials per can0.25 Other variable production costs per can0.05 cost to corrupt cans - per can0.45 Required rate of return12% revenue income rate35% Cost to originate:Make barter for one-year cost of direct materials: strike of 1,100,000 cans per year 330,000 Annual cost of direct labor for new employees Wages 72,000 health Benefits 7,500 Other Benefits 12,960 replete(p) wages and benefits 92,460 Total annual production costs 422,460 Annual cost to acquire cans 495,000 gramm atical constituent 1: Cash flows over the life of the cast Before tax revenueTax EffectAfter Tax Item Annual capital savings (make vs buy) 72,540 0.

65 47,151 Tax savings due to have on 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 decrease costs Annual cash savings (before tax effect) 72,540 slender 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: endure Present ValueBefore t axAfter tax12% PVPresent ItemYearamountTax ! % totFactorValue Cost of Machine0...

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