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...
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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...
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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
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