Question
In: Finance
Revenues generated by a new fad product are forecast as follows: Year Revenues 1 $40,000 2...
Revenues generated by a new fad product are forecast as follows:
| Year | Revenues |
| 1 | $40,000 |
| 2 | 30,000 |
| 3 | 10,000 |
| 4 | 5,000 |
| Thereafter | 0 |
Expenses are expected to be 40% of revenues, and working capital required in each year is expected to be 20% of revenues in the following year. The product requires an immediate investment of $42,000 in plant and equipment.
a. What is the initial investment in the product? Remember working capital.
b. If the plant and equipment are depreciated over
4 years to a salvage value of zero using straight-line
depreciation, and the firm’s tax rate is 20%, what are the project
cash flows in each year? Assume the plant and equipment are
worthless at the end of 4 years. (Do not round intermediate
calculations.)
c. If the opportunity cost of capital is 10%, what
is the project's NPV? (A negative value should be indicated
by a minus sign. Do not round intermediate calculations. Round your
answer to 2 decimal places.)
d. What is project IRR? (Do not round
intermediate calculations. Enter your answer as a percent rounded
to 2 decimal places.)
Solutions
jeff jeffy answered 3 months agoRelated Solutions
Revenues generated by a new fad product are forecast as follows: Year Revenues 1 $40,000 2...
Revenues generated by a new fad product are forecast as follows:
Year Revenues 1 $40,000 2 30,000 3 20,000 4 5,000 Thereafter 0
Expenses are expected to be 40% of revenues, and working capital
required in each year is expected to be 20% of revenues in the
following year. The product requires an immediate investment of
$49,000 in plant and equipment. Required: a. What is the initial
investment in the product? Remember working capital. b. If the
plant and equipment...
Revenues generated by a new fad product are forecast as follows: Year Revenues 1 $40,000 2...
Revenues generated by a new fad product are forecast as
follows:
Year
Revenues
1
$40,000
2
30,000
3
20,000
4
5,000
Thereafter
0
Expenses are expected to be 40% of revenues, and working capital
required in each year is expected to be 20% of revenues in the
following year. The product requires an immediate investment of
$49,000 in plant and equipment.
Required:
a. What is the initial investment in the
product? Remember working capital.
b. If the plant and equipment...
Revenues generated by a new fad product are forecast as follows: Year Revenues 1 $40,000 2...
Revenues generated by a new fad product are forecast as
follows:
Year
Revenues
1
$40,000
2
20,000
3
15,000
4
10,000
Thereafter
0
Expenses are expected to be 40% of revenues, and working capital
required in each year is expected to be 20% of revenues in the
following year. The product requires an immediate investment of
$46,000 in plant and equipment.
Required:
a. What is the initial investment in the
product? Remember working capital.
b. If the plant and equipment...
Revenues generated by a new fad product are forecast as follows: Year Revenues 1 $40,000 2...
Revenues generated by a new fad product are forecast as follows:
Year Revenues 1 $40,000 2 30,000 3 20,000 4 10,000 Thereafter 0
Expenses are expected to be 40% of revenues, and working capital
required in each year is expected to be 10% of revenues in the
following year. The product requires an immediate investment of
$53,000 in plant and equipment. a. What is the initial investment
in the product? Remember working capital. b. If the plant and
equipment are...
Revenues generated by a new fad product are forecast as follows: Year Revenues 1 $40,000 2...
Revenues generated by a new fad product are forecast as
follows:
Year
Revenues
1
$40,000
2
30,000
3
10,000
4
5,000
Thereafter
0
Expenses are expected to be 40% of revenues, and working capital
required in each year is expected to be 20% of revenues in the
following year. The product requires an immediate investment of
$42,000 in plant and equipment.
a. What is the initial investment in the
product? Remember working capital.
b. If the plant and equipment are...
Revenues generated by a new fad product are forecast as follows: Year Revenues 1 $60,000 2...
Revenues generated by a new fad product are forecast as
follows:
Year
Revenues
1
$60,000
2
40,000
3
30,000
4
10,000
Thereafter
0
Expenses are expected to be 30% of revenues, and working capital
required in each year is expected to be 10% of revenues in the
following year. The product requires an immediate investment of
$81,000 in plant and equipment.
b. If the plant and equipment are depreciated over
4 years to a salvage value of zero using straight-line...
Revenues generated by a new fad product are forecast as follows year Revenues 1 $50,000 2...
Revenues generated by a new fad product are forecast as
follows
year Revenues
1 $50,000
2 40,000
3 20,000
4 10,000
Expenses are expected to be 50% of revenues, and working capital
required in each year is expected to be 20% of revenues in the
following year. The product requires an immediate investment of
$40,000 in plant and equipment.
Required:
a. What is the initial investment in the
product? Remember working capital.
b. If the plant and equipment are depreciated...
Revenues generated by a new fad product are forecast as follows: Year Revenues 1 $55,000 2...
Revenues generated by a new fad product are forecast as
follows:
Year
Revenues
1
$55,000
2
45,000
3
25,000
4
15,000
Thereafter
0
Expenses are expected to be 40% of revenues, and working capital
required in each year is expected to be 20% of revenues in the
following year. The product requires an immediate investment of
$55,000 in plant and equipment.
Required:
a. What is the initial investment in the
product? Remember working capital.
b. If the plant and equipment...
Revenues generated by a new fad product are forecast as follows: Year Revenues 1 $55,000 2...
Revenues generated by a new fad product are forecast as
follows:
Year
Revenues
1
$55,000
2
45,000
3
25,000
4
15,000
Thereafter
0
Expenses are expected to be 40% of revenues, and working capital
required in each year is expected to be 20% of revenues in the
following year. The product requires an immediate investment of
$55,000 in plant and equipment.
Required:
a. What is the initial investment in the
product? Remember working capital.
b. If the plant and equipment...
Revenues generated by a new fad product are forecast as follows: Year Revenues 1 $45,000 2...
Revenues generated by a new fad product are forecast as
follows:
Year
Revenues
1
$45,000
2
35,000
3
25,000
4
20,000
Thereafter
0
Expenses are expected to be 40% of revenues, and working capital
required in each year is expected to be 20% of revenues in the
following year. The product requires an immediate investment of
$60,000 in plant and equipment.
Required:
a. What is the initial investment in the
product? Remember working capital.
b. If the plant and equipment...
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