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In: Finance
Kate is evaluating an idea to open her own business. The initial investment is estimated to...
Kate is evaluating an idea to open her own business. The initial investment is estimated to be $100,000. The investment horizon is 5 years. She will use a 5-year straight-line depreciation schedule, with an ending book value of zero for the assets. The salvage value for the assets at the end of the project is $20,000. The initial working capital requirement is $10,000 and the working capital remains to be $10,000 each year. Kate expects to generate the revenues of $80,000 with the costs of $40,000 each year during the 5-year time period. The tax rate is 21%. Compute the net present value (NPV) for this investment using the required return of 10%.
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jeff jeffy answered 2 years agoRelated Solutions
Maria is evaluating an idea to open her own business. The initial investment is 34 estimated...
Maria is evaluating an idea to open her own business. The
initial investment is 34 estimated to be $100,000. The investment
horizon is 5 years. She will use a 5-year straight-line
depreciation schedule, with an ending book value of zero for the
assets. The salvage value for the assets at the end of the project
is $20,000. The initial working capital requirement is $10,000 and
the working capital remains to be $10,000 each year. Maria expects
to generate the revenues...
Ruth Ginsburg is evaluating two options. The first option is to open her own legal practice....
Ruth Ginsburg is evaluating two options. The first option is to
open her own legal practice. Based on her business plan, she
computed the following annual estimates using very conservative
assumptions:
Total revenue = $220,000
Purchases = $80,000
Utility costs = $27,000
Parttime Administrative Assistant = $25,000
Ruth will operate the business by herself. She will operate the
business from a building that she owns. The building has been paid
in full.
The second option is to work for a...
Rachel plans to open a coffee shop with her friends. After the initial investment, the project...
Rachel plans to open a coffee shop with her friends. After the
initial investment, the project will generate $1 million per year
for the next five years, and offers the internal rate of return
(IRR) of 15%. What is the project's initial investment?
3,352,155.10
5,000,000
4,213,154.20
4,250,000
Risky Business is looking at a project with the estimated cash flow as follows: Initial investment...
Risky Business is looking at a project with the estimated cash
flow as follows:
Initial investment at start of project:$12,200,000
Cash flow at end of year one: $2,196,000
Cash flow at end of years two through six:$2,440,000 each
year
Cash flow at end of years seven through nine:$2,635,200 each
year
Cash flow at end of year ten: $2,027,077
Risky Business wants to know the payback period, NPV, IRR, and
PI of this project. The appropriate discount rate for the project...
Risky Business is looking at a project with the following estimated cash flow: Initial investment at...
Risky Business is looking at a project with the following
estimated cash flow:
Initial investment at start of project: $10,000,000
Cash flow at end of year one: $1,700,000
Cash flow at end of years two through six: $2,000 each
year
Cash flow at end of years seven through nine: $2,040,000 each
year
Cash flow at end of year ten: $1,569,231
Risky Business wants to know the payback period, NPV, IRR,
MIRR, and PI of this project. The
appropriate discount rate...
Marian Plunket owns her own business and is considering an investment. If she undertakes the investment,...
Marian Plunket owns her own business and is considering an
investment. If she undertakes the investment, it will pay $5,560
at the end of each of the next 3 years. The opportunity requires an
initial investment of $1,390 plus an additional investment at the
end of the second year of $6,950. What is the NPV of this
opportunity if the interest rate is 2.1% per year? Should Marian
take it?
What is the NPV of this opportunity if the interest...
Marian Plunket owns her own business and is considering an investment. If she undertakes the investment,...
Marian Plunket owns her own business and is considering an
investment. If she undertakes the investment, it will pay $5360 at
the end of each of the next 3 years. The opportunity requires an
initial investment of $1340 plus an additional investment at the
end of the second year of $6700 . What is the NPV of this
opportunity if the interest rate is 2.1% per year? Should Marian
take it? What is the NPV of this opportunity if the...
Marian Plunket owns her own business and is considering an investment. If she undertakes the investment,...
Marian Plunket owns her own business and is considering an
investment. If she undertakes the investment, it will pay $5,680
at the end of each of the next 3 years. The opportunity requires an
initial investment of $1,420 plus an additional investment at the
end of the second year of $7,100.
What is the NPV of this opportunity if the interest rate is 2.1%
per year? Should Marian take it?
What is the NPV of this opportunity if the interest...
Marian Plunket owns her own business and is considering an investment. If she undertakes the investment,...
Marian Plunket owns her own business and is considering an
investment. If she undertakes the investment, it will pay $ 20,000
at the end of each of the next 3 years. The opportunity requires an
initial investment of $ 5,000 plus an additional investment at the
end of the second year of $ 25,000. What is the NPV of this
opportunity if the interest rate is 2 % per year? Should Marian
take it?
Marian Plunket owns her own business and is considering an investment. If she undertakes the investment,...
Marian Plunket owns her own business and is considering an
investment. If she undertakes the investment, it will pay
$5,320
at the end of each of the next
33
years. The opportunity requires an initial investment of
$1,330
plus an additional investment at the end of the second year
of
$6,650.
What is the NPV of this opportunity if the interest rate is
1.8 %
per year? Should Marian take it?
What is the NPV of this opportunity if the...
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