Purchase Solution

# Finding out Calculations of NPV, IRR and Contribution Margin

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Sac need to manufacure 100,000.00 per year a life of 5 years and no salvage value. The straight line method will be used and there will be depreciation, the average cost is \$20.00/ the expected cost of \$8 to manufacture the new equipment.

The initial investment is 3,000,000.00 to purchase

Tax rate 34%
Payback and IRR and NPV method used

% of capital Rate of Return
Stocks 60% 14%
Bonds 40% 6%

##### Solution Summary

This solution helps find calculations of net present value, internal rate of return and contribution margin. Calculations are given in Excel.

##### Solution Preview

1 CONTRIBUTION MARGIN
\$ per unit
Sale price \$20.00
Variable cost of manufacturing \$8.00
Contribution margin \$12.00

2 NPV

Yearly production 100,000 units
Cost of machine \$3,000,000
Depreciation Straight line
Life of machine 5 years
Salvage value \$-
Annual depreciation \$600,000 ...

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