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In: Finance
Litchfield Design is evaluating a 3-year project that would involve buying a new piece of equipment...
Litchfield Design is evaluating a 3-year project that would involve buying a new piece of equipment for 400,000 dollars today. The equipment would be depreciated straight-line to 30,000 dollars over 2 years. In 3 years, the equipment would be sold for an after-tax cash flow of 42,000 dollars. In each of the 3 years of the project, relevant revenues are expected to be 246,000 dollars and relevant costs are expected to be 127,000 dollars. The tax rate is 50 percent and the cost of capital for the project is 9.04 percent. What is the NPV of the project?
Solutions
jeff jeffy answered 2 years agoRelated Solutions
Litchfield Design is evaluating a 3-year project that would involve buying a new piece of equipment...
Litchfield Design is evaluating a 3-year project that would
involve buying a new piece of equipment for 340,000 dollars today.
The equipment would be depreciated straight-line to 20,000 dollars
over 2 years. In 3 years, the equipment would be sold for an
after-tax cash flow of 34,000 dollars. In each of the 3 years of
the project, relevant revenues are expected to be 212,000 dollars
and relevant costs are expected to be 111,000 dollars. The tax rate
is 50 percent...
Litchfield Design is evaluating a 3-year project that would involve buying a new piece of equipment...
Litchfield Design is evaluating a 3-year project that would
involve buying a new piece of equipment for 450,000 dollars today.
The equipment would be depreciated straight-line to 50,000 dollars
over 2 years. In 3 years, the equipment would be sold for an
after-tax cash flow of 63,000 dollars. In each of the 3 years of
the project, relevant revenues are expected to be 369,000 dollars
and relevant costs are expected to be 142,000 dollars. The tax rate
is 50 percent...
Litchfield Design is evaluating a 3-year project that would involve buying a new piece of equipment...
Litchfield Design is evaluating a 3-year project that would
involve buying a new piece of equipment for 430,000 dollars today.
The equipment would be depreciated straight-line to 40,000 dollars
over 2 years. In 3 years, the equipment would be sold for an
after-tax cash flow of 52,000 dollars. In each of the 3 years of
the project, relevant revenues are expected to be 259,000 dollars
and relevant costs are expected to be 95,000 dollars. The tax rate
is 50 percent...
16-3) Litchfield Design is evaluating a 3-year project that would involve buying a new piece of equipment...
16-3) Litchfield Design is evaluating a 3-year
project that would involve buying a new piece of equipment for
430,000 dollars today. The equipment would be depreciated
straight-line to 20,000 dollars over 2 years. In 3 years, the
equipment would be sold for an after-tax cash flow of 26,000
dollars. In each of the 3 years of the project, relevant revenues
are expected to be 302,000 dollars and relevant costs are expected
to be 130,000 dollars. The tax rate is 50 percent...
Fairfax Paint is evaluating a 2-year project that would involve buying equipment for 420,000 dollars that...
Fairfax Paint is evaluating a 2-year project that would involve
buying equipment for 420,000 dollars that would be depreciated to
20,000 dollars over 2 years using straight-line depreciation. Cash
flows from capital spending would be 0 dollars in year 1 and 26,000
dollars in year 2. To finance the project, Fairfax Paint would
borrow 420,000 dollars. The firm would receive 420,000 dollars from
the bank today and would pay the bank $0 in 1 year and 477,246
dollars in 2...
Silver Sun Food is evaluating the medical clinic project, a 2-year project that would involve buying...
Silver Sun Food is evaluating the medical clinic project, a
2-year project that would involve buying equipment for 38,000
dollars that would be depreciated to zero over 2 years using
straight-line depreciation. Cash flows from capital spending would
be $0 in year 1 and 15,000 dollars in year 2. Relevant annual
revenues are expected to be 100,000 dollars in year 1 and 100,000
dollars in year 2. Relevant expected annual variable costs from the
project are expected to be 10,000...
Violet Sky Entertainment is evaluating the trampoline park project, a 2-year project that would involve buying...
Violet Sky Entertainment is evaluating the trampoline park
project, a 2-year project that would involve buying equipment for
54,000 dollars that would be depreciated to zero over 2 years using
straight-line depreciation. Cash flows from capital spending would
be $0 in year 1 and 5,000 dollars in year 2. Relevant annual
revenues are expected to be 83,000 dollars in year 1 and 83,000
dollars in year 2. Relevant expected annual variable costs from the
project are expected to be 10,000...
Silver Sun Packaging is evaluating the vending machine project, a 2-year project that would involve buying...
Silver Sun Packaging is evaluating the vending machine project,
a 2-year project that would involve buying equipment for 24,000
dollars that would be depreciated to zero over 2 years using
straight-line depreciation. Cash flows from capital spending would
be $0 in year 1 and 13,000 dollars in year 2. Relevant annual
revenues are expected to be 61,000 dollars in year 1 and 61,000
dollars in year 2. Relevant expected annual variable costs from the
project are expected to be 11,000...
Red Royal Banking is evaluating the yoga studio project, a 2-year project that would involve buying...
Red Royal Banking is evaluating the yoga studio project, a
2-year project that would involve buying equipment for 76,000
dollars that would be depreciated to zero over 2 years using
straight-line depreciation. Cash flows from capital spending would
be $0 in year 1 and 19,000 dollars in year 2. Relevant annual
revenues are expected to be 84,000 dollars in year 1 and 84,000
dollars in year 2. Relevant expected annual variable costs from the
project are expected to be 16,000...
DT is evaluating an alternative for a new piece of equipment. They estimate the new equipment...
DT is evaluating an alternative for a new piece of equipment.
They estimate the new equipment will cost $164,000, last 4 years,
and have a maintenance and operation cost of $55,000 per year with
no salvage value. Using a MARR of 22% per year, what is the present
worth?
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