A 10-yr project has an initial cost of $400,000 for fixed assets. The fixed assets will...

A 10-yr project has an initial cost of $400,000 for fixed assets. The fixed assets will be depreciated to a $0 book value using a 20-yr straight line depreciation method. Each year, annual revenue is $60,000 and cost is $10,000. After 10 years, you will terminate the project. You expect to sell the the fixed assets for $250,000. The project is financed by 40% equity and 60% debt. The required rate of return on equity is 7% and the borrowing cost is 3%. Assume the tax rate is 25%. What is the project's NPV?

Solutions

Expert Solution

Please thumbs up :)

jeff jeffy answered 1 year ago

Next > < Previous

Related Solutions

A 10-yr project has an initial cost of $400,000 for fixed assets. The fixed assets will...

A 10-yr project has an initial cost of $400,000 for fixed assets. The fixed assets will be depreciated to a $0 book value using a 20-yr straight line depreciation method. Each year, annual revenue is $50,000 and cost is $15,000. After 10 years, you will terminate the project. You expect to sell the the fixed assets for $250,000. The project is financed by 40% equity and 60% debt. The required rate of return on equity is 12% and the borrowing...

A 10-yr project has an initial cost of $400,000 for fixed assets. The fixed assets will...

A 10-yr project has an initial cost of $500,000 for fixed assets. The fixed assets will...

A 10-yr project has an initial cost of $500,000 for fixed assets. The fixed assets will be depreciated to a $0 book value using a 20-yr straight line depreciation method. Each year, annual revenue is $50,000 and cost is $15,000. After 10 years, you will terminate the project. You expect to sell the the fixed assets for $350,000. The project is financed by 40% equity and 60% debt. The required rate of return on equity is 7% and the borrowing...

Gateway Communications is considering a project with an initial fixed assets cost of $1.76 million that...

Gateway Communications is considering a project with an initial fixed assets cost of $1.76 million that will be depreciated straight-line to a zero book value over the 10-year life of the project. At the end of the project the equipment will be sold for an estimated $234,000. The project will not change sales but will reduce operating costs by $384,500 per year. The tax rate is 34 percent and the required return is 10.9 percent. The project will require $49,000...

Gateway Communications is considering a project with an initial fixed assets cost of $1.74 million that...

Gateway Communications is considering a project with an initial fixed assets cost of $1.74 million that will be depreciated straight-line to a zero book value over the 10-year life of the project. At the end of the project the equipment will be sold for an estimated $232,000. The project will not change sales but will reduce operating costs by $383,500 per year. The tax rate is 35 percent and the required return is 10.7 percent. The project will require $48,000...

Gateway Communications is considering a project with an initial fixed assets cost of $1.63 million that...

Gateway Communications is considering a project with an initial fixed assets cost of $1.63 million that will be depreciated straight-line to a zero book value over the 10-year life of the project. At the end of the project the equipment will be sold for an estimated $233,000. The project will not change sales but will reduce operating costs by $384,000 per year. The tax rate is 40 percent and the required return is 10.8 percent. The project will require $48,500...

Gateway Communications is considering a project with an initial fixed assets cost of $1.59 million that...

Gateway Communications is considering a project with an initial fixed assets cost of $1.59 million that will be depreciated straight-line to a zero book value over the 10-year life of the project. At the end of the project the equipment will be sold for an estimated $236,000. The project will not change sales but will reduce operating costs by $385,500 per year. The tax rate is 40 percent and the required return is 11.1 percent. The project will require $50,000...

Gateway Communications is considering a project with an initial fixed assets cost of $1.59 million that...

Gateway Communications is considering a project with an initial fixed assets cost of $1.59 million that will be depreciated straight-line to a zero book value over the 10-year life of the project. At the end of the project the equipment will be sold for an estimated $236,000. The project will not change sales but will reduce operating costs by $385,500 per year. The tax rate is 21 percent and the required return is 11.1 percent. The project will require $50,000...

Gateway Communications is considering a project with an initial fixed assets cost of $1.69 million that...

Gateway Communications is considering a project with an initial fixed assets cost of $1.69 million that will be depreciated straight-line to a zero book value over the 10-year life of the project. At the end of the project the equipment will be sold for an estimated $230,000. The project will not change sales but will reduce operating costs by $382,500 per year. The tax rate is 40 percent and the required return is 10.5 percent. The project will require $47,000...

Gateway Communications is considering a project with an initial fixed assets cost of $1.56 million that...

Gateway Communications is considering a project with an initial fixed assets cost of $1.56 million that will be depreciated straight-line to a zero book value over the 9-year life of the project. At the end of the project the equipment will be sold for an estimated $239,000. The project will not change sales but will reduce operating costs by $397,000 per year. The tax rate is 40 percent and the required return is 11.4 percent. The project will require $51,500...

Subjects