Question
In: Finance
A firm is considering a new project that costs $10,000 that will last 5 years and...
- A firm is considering a new project that costs $10,000 that
will last 5 years and will have no salvage value. The project would
save $3,000 per year in salaries and would be financed with a loan
that will accrue interest costs of 15% per year. The firm’s tax
rate is 40%, its cost of capital is 20%, and the firm will use the
straight-line method of depreciation.
- What is the NPV of the project?
- Should the firm invest in the project?
Solutions
Expert Solution
Answer;
Part a) NPV = ($4,915.96)
Part b) Decision; No, Because NPV is Negative
Explanation;
Depriciation Amount = Initial Investment - Salvage Value / Period
= $10,000 - $0 / 5 years = $2,000
Interest Amount Per Period = Investment Amount x Interest Rate = $10,000 x 15% = $1,500
I am trying to help you out with all my effort and heart. Please don’t forget, to like the answer if it was helpful. It keeps me Motivated.
jeff jeffy answered 2 years agoRelated Solutions
Company C is considering a new project that is expected to last for 5 years. Its...
Company C is considering a new project that is expected to last
for 5 years. Its marketing group expects annual sales of $40
million for the first year, increasing by $10 million per year for
the following four years. Manufacturing costs (i.e., COGS) and
operating expenses (excluding depreciation) are expected to be 40%
of sales and $7 million, respectively, from years 1-5. Developing
the product will require upfront R&D and marketing expenses of
$8 million total in period 0. The...
(a) The manufacturing firm Rebo is considering a new capital investment project. The project will last...
(a) The manufacturing firm Rebo is considering a new capital
investment project. The project will last for five years. The
anticipated sales revenue from the project is $3 million in year 1
and $4.2 million in each of years 2 – 5. The cost of materials and
labour is 50% of sales revenue and other expenses are $1 million in
each year. The project will require working capital investment
equal to 20% of the expected sales revenue for each year....
The manufacturing firm Rebo is considering a new capital investment project. The project will last for...
The manufacturing firm Rebo is considering a new capital
investment project. The project will last for five years. The
anticipated sales revenue from the project is $3 million in year 1
and $4.2 million in each of years 2 – 5. The cost of materials and
labour is 50% of sales revenue and other expenses are $1 million in
each year. The project will require working capital investment
equal to 20% of the expected sales revenue for each year. This...
The manufacturing firm Rebo is considering a new capital investment project. The project will last for...
The manufacturing firm Rebo is considering a new capital
investment project. The project will last for five years. The
anticipated sales revenue from the project is $3 million in year 1
and $4.2 million in each of years 2 – 5. The cost of materials and
labour is 50% of sales revenue and other expenses are $1 million in
each year. The project will require working capital investment
equal to 20% of the expected sales revenue for each year. This...
The manufacturing firm Rebo is considering a new capital investment project. The project will last for...
The manufacturing firm Rebo is considering a new capital
investment project. The project will last for five years. The
anticipated sales revenue from the project is $3 million in year 1
and $4.2 million in each of years 2 – 5. The cost of materials and
labour is 50% of sales revenue and other expenses are $1 million in
each year. The project will require working capital investment
equal to 20% of the expected sales revenue for each year. This...
(a) The manufacturing firm Rebo is considering a new capital investment project. The project will last...
(a) The manufacturing firm Rebo is considering a new capital
investment project. The project will last for five years. The
anticipated sales revenue from the project is $3 million in year 1
and $4.2 million in each of years 2 – 5. The cost of materials and
labour is 50% of sales revenue and other expenses are $1 million in
each year. The project will require working capital investment
equal to 20% of the expected sales revenue for each year....
The manufacturing firm Rebo is considering a new capital investment project. The project will last for...
The manufacturing firm Rebo is considering a new capital
investment project. The project will last for five years. The
anticipated sales revenue from the project is $3 million in year 1
and $4.2 million in each of years 2 – 5. The cost of materials and
labour is 50% of sales revenue and other expenses are $1 million in
each year. The project will require working capital investment
equal to 20% of the expected sales revenue for each year. This...
the manufacturing firm Rebo is considering a new capital investment project. The project will last for...
the manufacturing firm Rebo is considering a new capital
investment project. The project will last for five years. The
anticipated sales revenue from the project is $3 million in year 1
and $4.2 million in each of years 2 – 5. The cost of materials and
labour is 50% of sales revenue and other expenses are $1 million in
each year. The project will require working capital investment
equal to 20% of the expected sales revenue for each year. This...
The manufacturing firm Rebo is considering a new capital investment project. The project will last for...
The manufacturing firm Rebo is considering a new capital
investment project. The project will last for five years. The
anticipated sales revenue from the project is $3 million in year 1
and $4.2 million in each of years 2 – 5. The cost of materials and
labour is 50% of sales revenue and other expenses are $1 million in
each year. The project will require working capital investment
equal to 20% of the expected sales revenue for each year. This...
(a) The manufacturing firm Rebo is considering a new capital investment project. The project will last...
(a) The manufacturing firm Rebo is considering a new capital
investment project. The project will last for five years. The
anticipated sales revenue from the project is $3 million in year 1
and $4.2 million in each of years 2 – 5. The cost of materials and
labour is 50% of sales revenue and other expenses are $1 million in
each year. The project will require working capital investment
equal to 20% of the expected sales revenue for each year....
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- Singh Development Co. is deciding whether to proceed with Project X. The cost would be $12...
- CS2123 Data Structures - Fall 2019 Assignment 1: Function Runtimes Table Due 9/11/19 by 11:59pm Completing...
- Question 2. Design a 16-1 MUX using any number of lower MUXs, such as 8-1 or...
- . Write a function that takes, as arguments, two objects, value1 and value2. If
- Wii Brothers, a game manufacturer, has a new idea for an adventure game. It can market...
- Consider the distillation of ethanol (C2H5OH) and the combustion of ethanol . Use a bullet point...
- 1.How does Economic exposure to exchange rate movements affect the capital budgeting of a firm? Provide...
ADVERTISEMENT