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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 1 week 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...
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$3,000,000 Variable expenses …………………………………………………………………………………………
1,800,000 Contribution margin ………………………………………………………………………………………..
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provide net operating income each year as follows (Ignore income
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Sales
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Variable expenses
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Contribution margin
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Ursus, Inc., is considering a project that would have a eleven-year life and would require 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
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Ursus, Inc., is considering a project that would have a eleven-year life and would require a...
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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
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Depreciation
168,000
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provide net operating income each year as follows (Ignore income
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$
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Variable
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Contribution
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320,000
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Ursus, Inc., is considering a project that would have a ten-year life and would require a...
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You are considering an investment project. The project has a life of three years. Project Information:...
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a. Compute...
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