Question
In: Finance
You are considering a proposal to produce and market a new sluffing machine. The most likely...
You are considering a proposal to produce and market a new sluffing machine. The most likely outcomes for the project are as follows: Expected sales: 100,000 units per year
Unit price: $190
Variable cost: $114
Fixed cost: $4,080,000
The project will last for 10 years and requires an initial investment of $11.28 million, which will be depreciated straight-line over the project life to a final value of zero. The firm’s tax rate is 30%, and the required rate of return is 12%. However, you recognize that some of these estimates are subject to error. Sales could fall 30% below expectations for the life of the project and, if that happens, the unit price would probably be only $180. The good news is that fixed costs could be as low as $2,720,000, and variable costs would decline in proportion to sales.
a. What is project NPV if all variables are as expected?
Solutions
jeff jeffy answered 3 months agoRelated Solutions
You are considering a proposal to produce and market a new sluffing machine. The most likely...
You are considering a proposal to produce and market a new
sluffing machine. The most likely outcomes for the project are as
follows:
Expected sales: 30,000 units per year
Unit price: $50
Variable cost: $30
Fixed cost: $300,000
The project will last for 10 years and requires an initial
investment of $1 million, which will be depreciated straight-line
over the project life to a final value of zero. The firm’s tax rate
is 30%, and the required rate of return...
You are considering a proposal to produce and market a new sluffing machine. The most likely...
You are considering a proposal to produce and market a new
sluffing machine. The most likely outcomes for the project are as
follows:
Expected sales: 100,000 units per year
Unit price: $190
Variable cost: $114
Fixed cost: $4,080,000
The project will last for 10 years and requires an initial
investment of $11.28 million, which will be depreciated
straight-line over the project life to a final value of zero. The
firm’s tax rate is 30%, and the required rate of return...
You are considering a proposal to produce and market a new sluffing machine. The most likely...
You are considering a proposal to produce and market a new
sluffing machine. The most likely outcomes for the project are as
follows:
Expected sales: 30,000 units per year
Unit price: $50
Variable cost: $30
Fixed cost: $300,000
The project will last for 10 years and requires an initial
investment of $1 million, which will be depreciated straight-line
over the project life to a final value of zero. The firm’s tax rate
is 30%, and the required rate of return...
Q: You are considering a proposal to produce and market a new sluffing machine. The most...
Q:
You are considering a proposal to produce and market a new
sluffing machine. The most likely outcomes for the project are as
follows:
Expected sales: 30,000 units per year
Unit price: $50
Variable cost: $30
Fixed cost: $300,000
The project will last for 10 years and requires an initial
investment of $1 million, which will be depreciated straight-line
over the project life to a final value of zero. The firm’s tax
rate is 30%, and the required rate of...
Polycorp Steel Division is considering a proposal to purchase a new machine to produce a new...
Polycorp Steel Division is considering a proposal to purchase a
new machine to produce a new product for a three-year contract. The
new machine will cost $1.83 million. The machine has an estimated
life of 3 years for accounting and taxation purposes. Installation
will cost a further $90,000. The contract will not continue beyond
three years and the equipment has an estimated salvage value at the
end of three years of $300,000. The tax rate is 29 percent and is...
Polycorp Steel Division is considering a proposal to purchase a new machine to produce a new...
Polycorp Steel Division is considering a proposal to purchase a
new machine to produce a new product for a three-year contract. The
new machine will cost $1.83 million. The machine has an estimated
life of 3 years for accounting and taxation purposes. Installation
will cost a further $90,000. The contract will not continue beyond
three years and the equipment has an estimated salvage value at the
end of three years of $300,000. The tax rate is 29 percent and is...
Polycorp Steel Division is considering a proposal to purchase a new machine to produce a new...
Polycorp Steel Division is considering a proposal to purchase a
new machine to produce a new product for a three-year contract. The
new machine will cost $1.83 million. The machine has an estimated
life of 3 years for accounting and taxation purposes. Installation
will cost a further $90,000. The contract will not continue beyond
three years and the equipment has an estimated salvage value at the
end of three years of $300,000. The tax rate is 29 percent and is...
Tocserp is considering the purchase of a new machine that will produce widgets. The widget maker...
Tocserp is considering the purchase of a new machine that will
produce widgets. The widget maker will require an initial
investment of $12,000 and has an economic life of five years and
will be fully depreciated by the straight line method. The machine
will produce 1,400 widgets per year with each costing $2.00 to
make. Each will be sold at $4.50. Assume Tocserp uses a discount
rate of 14 percent and has a tax rate of 34 percent. What is...
A corporation is considering a proposal for the purchase of a machine that will save $250,000...
A corporation is considering a proposal for the purchase of a
machine that will save $250,000 per year before taxes. The cost of
operating the machine, including maintenance, is $35,000 per year.
The machine will be needed for five years after which it will have
a zero salvage value. MACRS depreciation will be used, assuming a
three‐year class life. The marginal income‐tax rate is 24%. If the
firm wants 15% IRR after taxes, how much can it afford to pay...
NEW PROJECT ANALYSIS You must evaluate a proposal to buy a new milling machine. The base...
NEW PROJECT ANALYSIS
You must evaluate a proposal to buy a new milling machine. The
base price is $163,000, and shipping and installation costs would
add another $18,000. The machine falls into the MACRS 3-year class,
and it would be sold after 3 years for $65,200. The applicable
depreciation rates are 33%, 45%, 15%, and 7%. The machine would
require a $3,000 increase in net operating working capital
(increased inventory less increased accounts payable). There would
be no effect on...
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- Define what an array index value is in JAVA. Then, write a JAVA program that passes...
- A buffer contains 1.0 mol of CH3CO2H and 1.0 mol of CH3CO2- diluted with water to...
- - A primary sedimentation basin for a municipal waste water treatment plant treats a flow of...
- Hello I'm currently having an error that says "main is not abstract and does not override...
- Give a direct proof of the following theorem, upon which case you can use it for...
- A7X Corp. just paid a dividend of $1.35 per share. The dividends are expected to grow...
- Please use Java language in an easy way with comments! Thanks! Create a calculator that uses...
ADVERTISEMENT