Heedy Incis Considering a Capital Investment Proposal That Costs $460,000 and and Has

question 95

Essay

Heedy Inc.is considering a capital investment proposal that costs $460,000 and has an estimated life of four years, and no residual value.The estimated net cash flows are as follows:
​ $$\begin{array} { c c } \text { Year } & \text { Net Cash Flow } \\1 & \$ 195,000 \\2 & 160,000 \\3 & 120,000 \\4 & 80,000\end{array}$$ ​
The minimum desired rate of return for net present value analysis is 10%.The present value of $1 at compound interest rates of 10% for 1, 2, 3, and 4 years is 0.909, 0.826, 0.751, and 0.683, respectively.Determine the net present value.

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Definitions:

Finishing Department

The final stage in the manufacturing process where products are completed, assembled, painted, or treated before sale.

Predetermined Overhead Rate

A rate calculated at the beginning of a period, used to allocate manufacturing overhead to products based on a particular activity base, such as machine hours or labor hours.

Machine-Hours

A measure of production output or activity based on the hours that machinery is operational.

Plantwide Predetermined Overhead Rate

A single overhead rate calculated by dividing estimated total manufacturing overhead costs by an estimated total cost driver, applied throughout the entire plant.