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In: Finance
The Down Towner is considering a project with a life of 4 years that will require...
The Down Towner is considering a project with a life of 4 years that will require $164,800 for fixed assets and $42,400 for net working capital. The fixed assets will be depreciated using the Year 2018 bonus depreciation method. At the end of the project, the fixed assets can be sold for $37,500 cash and the net working capital will return to its original level. The project is expected to generate annual sales of $195,000 and costs of $117,500. The tax rate is 24 percent and the required rate of return is 13 percent. What is the project's net present value?
Solutions
Expert Solution
| NPV | 46482.43 |
WORKINGS
| Year | Initial cost | Working capital | tax shield=rate*depreciation | net sales after tax | Salvage after tax | Net CF |
| 0 | -164800 | -42400 | -207200 | |||
| 1 | 39552 | 58900 | 98452 | |||
| 2 | 58900 | 58900 | ||||
| 3 | 58900 | 58900 | ||||
| 4 | 42400 | 58900 | 28500 | 129800 | ||
| NPV | 46482.43 |
jeff jeffy answered 5 hours agoRelated Solutions
The Down Towner is considering a project with a life of 4 years that will require...
The Down Towner is considering a project with a life of 4 years
that will require $164,800 for fixed assets and $42,400 for net
working capital. The fixed assets will be depreciated using the
Year 2018 bonus depreciation method. At the end of the project, the
fixed assets can be sold for $37,500 cash and the net working
capital will return to its original level. The project is expected
to generate annual sales of $195,000 and costs of $117,500. The...
PLEASE SHOW CALCULATOR INPUTS Reynolds Metals is considering a project with a life of 4 years...
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Reynolds Metals is considering a project with a life of 4 years
that will produce annual operating cash flows of $57,000. During
the life of the project, inventory will be lowered by $28,000,
accounts receivable will increase by $15,000 and accounts payable
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Ursus, Inc., is considering a project that would have a ten-year life and would require a...
Ursus, Inc., is considering a project that would have a ten-year
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operating income each year as follows (Ignore income taxes.):
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Variable expenses
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Contribution margin
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Fixed out-of-pocket cash expenses
$
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Depreciation
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15 Lamar Company is considering a project that would have an eight-year life and require a...
15 Lamar Company is considering a project that would have an
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At the end of 7 years, the project would terminate and the
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net operating income each year as follows: The company's discount
rate is 11%. Sales ………………………………………………………………………………………………………………
$3,000,000 Variable expenses …………………………………………………………………………………………
1,800,000 Contribution margin ………………………………………………………………………………………..
1,200,000 Fixed expenses Advertising, salaries, and other fixed
out-of-pocket costs …. $600,000 Depreciation
………………………………………………………………………….. 355,000...
Ursus, Inc., is considering a project that would have a eleven-year life and would require a...
Ursus, Inc., is considering a project that would have a
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and the equipment would have no salvage value. The project would
provide net operating income each year as follows (Ignore income
taxes.):
Sales
$
2,100,000
Variable expenses
1,400,000
Contribution margin
700,000
Fixed expenses:
Fixed out-of-pocket cash
expenses
$
370,000
Depreciation
168,000
538,000
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Ursus, Inc., is considering a project that would have a eleven-year life and would require a...
Ursus, Inc., is considering a project that would have a
eleven-year life and would require a $1,848,000 investment in
equipment. At the end of eleven years, the project would terminate
and the equipment would have no salvage value. The project would
provide net operating income each year as follows (Ignore income
taxes.):
Sales
$
2,100,000
Variable expenses
1,400,000
Contribution margin
700,000
Fixed expenses:
Fixed out-of-pocket cash
expenses
$
370,000
Depreciation
168,000
538,000
Net operating income
$
162,000
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Ursus, Inc., is considering a project that would have a eleven-year life and would require a...
Ursus, Inc., is considering a project that would have a
eleven-year life and would require a $1,848,000 investment in
equipment. At the end of eleven years, the project would terminate
and the equipment would have no salvage value. The project would
provide net operating income each year as follows (Ignore income
taxes.):
Sales
$
2,100,000
Variable expenses
1,400,000
Contribution margin
700,000
Fixed expenses:
Fixed out-of-pocket cash
expenses
$
370,000
Depreciation
168,000
538,000
Net operating income
$
162,000
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Ursus, Inc., is considering a project that would have a five-year life and would require a...
Ursus, Inc., is considering a project that would have a
five-year life and would require a $2,400,000 investment in
equipment. At the end of five years, the project would terminate
and the equipment would have no salvage value. The project would
provide net operating income each year as follows (Ignore income
taxes.):
Sales
$
3,500,000
Variable
expenses
2,100,000
Contribution
margin
1,400,000
Fixed
expenses:
Fixed
out-of-pocket cash expenses
$
600,000
Depreciation
480,000
1,080,000
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income
$
320,000
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Ursus, Inc., is considering a project that would have a ten-year life and would require a...
Ursus, Inc., is considering a project that would have a ten-year
life and would require a $1,806,000 investment in equipment. At the
end of ten years, the project would terminate and the equipment
would have no salvage value. The project would provide net
operating income each year as follows (Ignore income taxes.):
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$
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Variable expenses
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Contribution margin
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You are considering an investment project. The project has a life of three years. Project Information:...
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life of three years. Project Information: Initial investment into a
new machine, which would cost Rs.4,50,000. Machine is to be
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with no salvage value at the end. Operating revenue is expected to
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expected to be Rs.3,00,000 per year. Assume tax rate is 30% and the
discount rate is 20%.
a. Compute...
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