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In: Finance
Louie’s Leisure Products is considering a project which will require the purchase of $1.5 million of...
Louie’s Leisure Products is considering a project which will require the purchase of $1.5 million of new equipment. Shipping and installation will be an additional $300,000. For tax purposes, the equipment will be depreciated straight-line to a salvage value of $200,000 over the five-year life of the project. Louie’s expects to sell the equipment at the end of five years for $100,000. Annual sales from this project are estimated at $1.2 million with annual operating costs estimated at $500,000. Net working capital is equal to $100,000, and all of the net working capital will be recouped at the end of the project. The firm desires a minimal 14% rate of return on this project. The tax rate is 34%. What is the NPV of the project?
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jeff jeffy answered 6 months agoRelated Solutions
Louie’s Leisure Products is considering a project which will require the purchase of $1.5 million of...
Louie’s Leisure Products is considering a project which will
require the purchase of $1.5 million of new equipment. Shipping and
installation will be an additional $300,000. For tax purposes, the
equipment will be depreciated straight-line to a salvage value of
$200,000 over the five-year life of the project. Louie’s expects to
sell the equipment at the end of five years for $100,000. Annual
sales from this project are estimated at $1.2 million with annual
operating costs estimated at $500,000. Net...
Sway's Back Store is considering a project which will require the purchase of $1.5 million in...
Sway's Back Store is considering a project which will require
the purchase of $1.5 million in new equipment. The equipment will
be depreciated straight-line to a book value of $0.5 million over
the 5-year life of the project. Annual sales from this project are
estimated at $950,000. The variable cost is 40% of the annual sales
and there is an annual fixed cost of $100,000. Sway's Back Store
will sell the equipment at the end of the project for a...
3. Louie's Leisure Products is considering replacing a project which will require the purchase of $1.4...
3. Louie's Leisure Products is considering replacing
a project which will require the purchase of $1.4 million in new
equipment. The equipment will be depreciated straight-line to a
zero book value over the 7-year life of the project. Louie's
expects to sell the equipment at the end of the project for 20% of
its original cost. The existing equipment of this project was
purchased 3 years back for $700,000 and has been depreciated using
5 year MACRS schedule. This machine...
RSM Co is considering a project which will require the purchase of $2.7 million in new...
RSM Co is considering a project which will require the purchase
of $2.7 million in new equipment. The equipment will be depreciated
straight-line to a book value of $1 million over the 5-year life of
the project. Annual sales from this project are estimated at
$2,950,000. The variable cost is 40% of the annual sales and there
is an annual fixed cost of $200,000. Sway's Back Store will sell
the equipment at the end of the project for 30% of...
Layla's Distribution Co. is considering a project which will require the purchase of $1.6 million in...
Layla's Distribution Co. is considering a project which will
require the purchase of $1.6 million in new equipment. The
equipment will be depreciated straight-line to a zero book value
over the 5-year life of the project. Layla's expects to sell the
equipment at the end of the project for $180,000. Annual sales from
this project are estimated at $1.3 million, and you will incur
$100,000 in fixed costs and variable costs equal to 10% of sales.
Net working capital equal...
1) ABC Ltd is considering a project which will require the purchase of a machine for...
1) ABC Ltd is considering a project which will require
the purchase of a machine for RO1,000,000 at time zero, this
machine will have a scrap value at the end of its four - year life:
this will be equal to its written - down value. (25% declining
balance writing - down allowance on the machine each year).
Corporation tax, at a rate of 30% of taxable income, is payable.
ABC Ltd's required rate of return is 12%. Operating cash...
A firm is considering a project with the following information: Project will require purchase of a...
A firm is considering a project with the following
information:
Project will require purchase of a machine for $92,101.00 that
is MACRS depreciable over a five-year schedule. (no depreciation
until end of year 1).
Project will require immediate non-depreciable expenses of
$25,021.00 TODAY (year 0).
Project will have the following projected balance sheet values
of NWC:
YEAR
0
1
2
NWC Level
$4,000
9.00% of sales
8.00% of sales
Sales for the project will be $54,556.00 per year, with all...
A company is considering a new project. This project will require the purchase of $321,000 of...
A company is considering a new project. This project will
require the purchase of $321,000 of equipment, the purchase of
$45,000 in inventory and will increase accounts payable by $73,000.
Expected sales are $625,000 with costs of $480,000. The project
will last for five years, be taxed at 35% and have a required rate
of return of 14%. The equipment will have no salvage value at the
end of the project and will be depreciated using the MACRS
three-year class....
Your company is considering a project which will require the purchase of $685,000 in new equipment....
Your company is considering a project which will require the
purchase of $685,000 in new equipment. The company expects to sell
the equipment at the end of the project for 25% of its original
cost, but some assets will remain in the CCA class. Annual sales
from this project are estimated at $244,000. Initial net working
capital equal to 30.50% of sales will be required. All of the net
working capital will be recovered at the end of the project....
Your company is considering a project which will require the purchase of $715,000 in new equipment....
Your company is considering a project which will require the
purchase of $715,000 in new equipment. The company expects to sell
the equipment at the end of the project for 25% of its original
cost, but some assets will remain in the CCA class. Annual sales
from this project are estimated at $256,000. Initial net working
capital equal to 32.00% of sales will be required. All of the net
working capital will be recovered at the end of the project....
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