Question
In: Finance
The FAR Corporation is considering a new project to manufacture solar powered widgets. Last year, the...
The FAR Corporation is considering a new project to manufacture solar powered widgets. Last year, the company paid a consulting firm $100,000 to conduct a market survey that suggested there is demand for solar powered widgets. The cost of the manufacturing equipment is $170,000. The cost of shipping and installation is an additional $10,000. The manufacturing equipment will be depreciated to $0 over its four year life using straight line depreciation. Sales are expected to be $300,000 per year and the cost of goods sold is expected to be 80% of sales. The project will require FAR to increase its inventory of raw materials from $0 to $30,000 at time t=0. At the end of three years, FAR plans on ending the project and selling the manufacturing equipment for $45,000. The marginal tax rate is 30% and the appropriate cost of capital for this project is 12%.
| Free Cash Flow at time t = 0: | |
| Free Cash Flow at time t = 1: | |
| Free Cash Flow at time t = 2: | |
| Free Cash Flow at time t = 3: | |
| NPV: |
Solutions
jeff jeffy answered 1 year agoRelated Solutions
SpinCo. is considering a new investment in a 3 year project to manufacture and sell turntables....
SpinCo. is considering a new investment in a 3 year project to
manufacture and sell turntables. The firm believes it can sell
turntables for $900 each and manufacture them at a variable cost
per unit of $400 excluding depreciation expense. The estimated
annual SG&A costs for the project are $1 million excluding
depreciation expense. The project will require an upfront
investment in new fixed assets of $6 million. SpinCo. will
depreciate these assets on a straight line basis over the...
1. Simes Innovations, Inc., is negotiating to purchase exclusive rights to manufacture and market a solar-powered...
1.
Simes
Innovations, Inc.,
is negotiating to purchase exclusive rights to manufacture and
market a solar-powered toy car. The car’s inventor has
offered Simesthe choice of either a one-time
payment of $1,500,000 today or a series of 5 year-end payments of
$385,000.
a. If
Simes
has a cost of
capital of 9%, which form of payment should the company choose? b.
What yearly payment would make the two offers identical in value at
a cost of capital of 9%?
c....
1. Simes Innovations, Inc., is negotiating to purchase exclusive rights to manufacture and market a solar-powered...
1.
Simes
Innovations, Inc.,
is negotiating to purchase exclusive rights to manufacture and
market a solar-powered toy car. The car’s inventor has
offered Simesthe choice of either a one-time
payment of $1,500,000 today or a series of 5 year-end payments of
$385,000.
a. If
Simes
has a cost of
capital of 9%, which form of payment should the company choose? b.
What yearly payment would make the two offers identical in value at
a cost of capital of 9%?
c....
Simes Innovations, Inc., is negotiating to purchase exclusive rights to manufacture and market a solar-powered toy...
Simes Innovations, Inc., is negotiating to purchase exclusive
rights to manufacture and market a solar-powered toy car. The
car's inventor has offered Simes the choice of either a one-time
payment of $1500000 today or a series of 6 year-end payments of
$355000. a. If Simes has a cost of capital of 9%, which form of
payment should it choose? b. What yearly payment would make the
two offers identical in value at a cost of capital of 9%? c. What...
Simes Innovations, Inc., is negotiating to purchase exclusive rights to manufacture and market a solar-powered toy...
Simes Innovations, Inc., is negotiating to purchase exclusive
rights to manufacture and market a solar-powered toy car. The
car's inventor has offered Simes the choice of either a one-time
payment of $2,800,000 today or a series of 10year-end payments of
$400, 000
a. If Simes has a cost of capital of 9%, which form of payment
should it choose?
b. What yearly payment would make the two offers identical in
value at a cost of capital of 9%?
c. What...
A company has just built a new factory to manufacture their widgets with a method they...
A company has just built a new factory to manufacture
their widgets with a method they believe should be more efficient
than their old method on a daily basis. To compare they recorded
the number of widgets produced by the old factory for the last 9
days before it was shutdown and the first 8 days of the new
factory's production. The company has reason to believe that daily
production of widgets does not follow the normal distribution and
have...
A company has just built a new factory to manufacture their widgets with a method they...
A company has just built a new factory to manufacture
their widgets with a method they believe should be more efficient
than their old method on a daily basis. To compare they recorded
the number of widgets produced by the old factory for the last 8
days before it was shutdown and the first 9 days of the new
factory's production. The company has reason to believe that daily
production of widgets does not follow the normal distribution and
have...
(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...
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- In C++, develop a menu program which reads in data from 4 different input files -...
- with C# create a console application project that outputs the number of bytes in memory that...
- 41. Meyer's Grocery signed a contract to build a store in Richmond, Kentucky. Soon afterward, Meyer's...
- Among the most important uses of managerial accounting data are establishing price for a particular product...
- Suppose that A is an individual investor and OL represents other investors. All the investors who...
- Programming Language: C++ Overview For this assignment, write a program that will simulate a single game...
- Do you feel that police officers should take into consideration the ethnic and cultural differences of...
ADVERTISEMENT