acc346 the production department has been investigating possible ways to trim total 492641

Clark Paints: The production department has been investigating possible ways to trim total production costs. One possibility currently being examined is to make the paint cans instead of purchasing them. The equipment needed would cost $200,000, with a disposal value of $40,000, and it would be able to produce 5,500,000 cans over the life of the machinery. The production department estimates that approximately 1,100,000 cans would be needed for each of the next five years.

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1. Based on the above information and using Excel, calculate the following items for this proposed equipment purchase:

ยท Annual cash flows over the expected life of the equipment o Payback period

  • Annual rate of return
  • Net present value
  • Internal rate of return

2. Would you recommend the acceptance of this proposal? Why or why not?

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