Question
In: Finance
What happens to the NPV of a one-year project if fixed costs are increased from $400 to $600, the firm is profitable, has a 15 percent tax rate and employs a 12 percent cost of capital?
What happens to the NPV of a one-year project if fixed costs are increased from $400 to $600, the firm is profitable, has a 15 percent tax rate and employs a 12 percent cost of capital?
|
A) NPV decreases by $178.23 |
||
|
B) NPV decreases by $113.04 |
||
|
C) NPV decreases by $151.78 |
||
|
D) NPV decreases by $200.00 |
Solutions
Expert Solution
If the fixed cost are increased by 200 then, we will discount the cost at present with the cost of capital and since it is just given that it is a fixed cost I will not be assuming that it is tax exempt.
Net present value will be decreasing by= ((600-400)/1.12)
All the other options are false.
Correct answer will be options (A) $178.24
jeff jeffy answered 2 years agoRelated Solutions
What is the NPV for a project whose cost of capital is 15 percent and initial...
What is the NPV for a project whose cost of capital is 15
percent and initial after-tax cost is $5,000,000 and is expected to
provide after-tax operating cash inflows of $1,800,000 in year 1,
$1,900,000 in year 2, $1,700,000 in year 3, and $1,300,000 in year
4?
Group of answer choices
a) $1 700,000
b) 371,764
c) -4,862,947
d) -137,053
What is the NPV for the following project if its cost of capital is 15 percent...
What is the NPV for the following project if its cost of capital
is 15 percent and its initial after tax cost is $5,000,000 and it
is expected to provide after-tax operating cash inflows of
$2,000,000 in year 1, $2,000,000 in year 2, $2,000,000 in year 3
and $1,410,000 in year 4?
a. 1,700,000
b. 372622
c.-137,053
d. none of the above
Compute the NPV statistic for Project Y if the appropriate cost of capital is 12 percent....
Compute the NPV statistic for Project Y if the appropriate cost
of capital is 12 percent. (Negative amount should be
indicated by a minus sign. Do not round
intermediate calculations and round your final answer to 2 decimal
places.)
Project Y
Time:
0
1
2
3
4
Cash flow:
–$9,200
$3,590
$4,420
$1,760
$540
NPV:
Should the project be accepted or rejected?
accepted
rejected
If the discount rate changes from 12% to 15%, what is the CHANGE in the NPV of the project approximately?
A project has the following cash flows:
Year 0
Year 1
Year 2
Year 3
Cash flow
-100.000
70.000
120.000
200.00
If the discount rate changes from 12% to 15%, what is the CHANGE
in the NPV of the project approximately?
Please no excel sheet, just detailed steps for someone new in
finance ;)
What is the NPV for a project if its cost of capital is 0 percent and...
What is the NPV for a project if its cost of capital is 0
percent and its initial after-tax cost is $5,000,000 and it is
expected to provide after-tax operating cash inflows of $1,800,000
in year 1, $1,900,000 in year 2, $1,700,000 in year 3, and
$1,300,000 in year 4?
Select one:
a. $6,700,000
b. $137,053
c. $1,700,000
d. $371,764
Which of the following is TRUE?
Select one:
a. The Gordon model assumes that the value of a share of...
a project has a cost of 10000$ and the cost of capital is 12% what is...
a
project has a cost of 10000$ and the cost of capital is 12% what is
the net present value given that the cash flow from the project of
next four years is 3500$ each year
A firm has a currentmarketvalueofINR250 crores. The current cost of equity is 15%and the tax rate...
A firm has a currentmarketvalueofINR250 crores. The current cost
of equity is 15%and the tax rate is 20 percent. If the firm has
announced to issue a per- petual debt of INR 50 crores at 6%
interest rate to change the capital structure of the firm, what is
the market value of the firm after this announcement?
A firm has a currentmarketvalueofINR250 crores. The current cost of equity is 15%and the tax rate...
A firm has a currentmarketvalueofINR250 crores. The current cost
of equity is 15%and the tax rate is 20 percent. If the firm has
announced to issue a per- petual debt of INR 50 crores at 6%
interest rate to change the capital structure of the firm, what is
the market value of the firm after this announcement?
Country Markets has an unlevered cost of capital of 11.45 percent, a tax rate of 35...
Country Markets has an unlevered cost of capital of 11.45
percent, a tax rate of 35 percent, and expected earnings before
interest and taxes of $18,700. The company has $11,000 in bonds
outstanding that have an 8 percent coupon and pay interest
annually. The bonds are selling at par value. What is the value of
WACC?
XYZ Co. has an unlevered cost of capital of 20%, a tax rate of 20% percent,...
XYZ Co. has an unlevered cost of capital of 20%, a tax rate of
20% percent, and expected earnings before interest and taxes of
$400,000 (in perpetuity). The company has outstanding bonds with a
market value of $1 million, and a yield of 6%. What is the cost of
equity?
A. 15.64%
B. 16.42%
C. 25.12%
D. 38.67%
E. none of the above
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- You are tasked with assessing the health department’s intervention program in preventing recurrence of acute alcohol...
- Compare the MOSFET, JFET , and BJT and identify the reasons these devices behave differently. What...
- How would you use SAS Enterprise Miner to create a neural network model of your example?
- Explain the use of neural networking modeling in predictive analytics.
- Current Market Mix of Netflix, as detail as possible, please.
- This is all one question, thank you so much in advance! You must evaluate a proposal...
- X Company is considering the purchase of a new processor that costs $200,000. Shipping and setup...
ADVERTISEMENT