# A firm evaluates all of its projects by applying the IRR rule

Chapter 9

7) Calculating IRR [LO5] A firm evaluates all of its projects by applying the IRR rule. If the required return is 14 percent, should the firm accept the following project?

Year Cash Flow

0    -\$26,000
1      11,000
2      14,000
3      10,000

Chapter 10

3) Calculating Projected Net Income [LO1] A proposed new investment has projected sales of \$635,000. Variable costs are 44 percent of sales, and fixed costs are \$193,000; depreciation is \$54,000. Prepare a pro forma income statement assuming a tax rate of 35 percent. What is the projected net income?

Chapter 11

1) Calculating Costs and Break-Even [LO3] Night Shades, Inc. (NSI), manufactures biotech sunglasses. The variable materials cost is \$9.64 per unit, and the variable labor cost is \$8.63 per unit. a. What is the variable cost per unit? b. Suppose NSI incurs fixed costs of \$915,000 during a year in which total production is 215,000 units. What are the total costs for the year? c. If the selling price is \$39.99 per unit, does NSI break even on a cash basis? If depreciation is \$465,000 per year, what is the accounting break-even point?

2) What is meant by capital planning? Why is IRR important to an organization? Why is NPV important to a project? How would you select from multiple projects presented to your organization?

Here’s the SOLUTION

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