Question

In: Finance

Aberdeen Outboard Motors is contemplating building a new plant. The company anticipates that the plant will...

Aberdeen Outboard Motors is contemplating building a new plant. The company anticipates that the plant will require an initial investment of

$2.06 million in net working capital today. The plant will last 11 ​years, at which point the full investment in net working capital will be recovered. Given an annual discount rate of 6.4%​, what is the net present value of this working capital​ investment?

The NPV is ​$_____ ​(Round to the nearest​ dollar.)

Solutions

Expert Solution

Year 0 1 2 3 4 5 6 7 8 9 10 11
Investment in working capital $         -2.06
Recovery of working capital $       2.06
Cash Flow $         -2.06 $           -   $           -   $           -   $           -   $           -   $           -   $           -   $           -   $           -   $           -   $       2.06
Discount Rate 6.40%
NPV $         -1.02

The NPV is $ -1.00 (Rounding to the nearest dollar)

jeff jeffy answered 1 year ago
Next > < Previous

Related Solutions

PROBLEM 2 BUILDING BLOCKS + JOB COSTING Seaway, Inc. manufactures outboard motors and other marine equipment....
PROBLEM 2 BUILDING BLOCKS + JOB COSTING Seaway, Inc. manufactures outboard motors and other marine equipment. The company uses a job-order costing system. Manufacturing overhead is applied on the basis of machine hours. Estimated manufacturing overhead for the year is $1,520,200, and management expects that 69,100 machine hours will be used. REQUIRED: Prepare journal entries to record the following events, which occurred during May: e) Labor costs incurred during May totaled $92,500. This amount includes $19,000 of indirect labor costs....
Coca Cola Inc. is considering opening a new bottling plant in the Southeastern U.S. It anticipates...
Coca Cola Inc. is considering opening a new bottling plant in the Southeastern U.S. It anticipates that this plant will increase sales by $8 million per year over the next 15 years. Costs to operate the plant are estimated to be $3 million per year. The company estimates that the cost of constructing the plant along with the cost of the equipment will be $30 million. These costs can be depreciated using straight-line depreciation. At the end of 15 years,...
Sunset Sarsaparilla is building a new bottling plant. This plant will cost $140M to construct, and...
Sunset Sarsaparilla is building a new bottling plant. This plant will cost $140M to construct, and will produce EBIT of $19M per year for the next 12 years. Sunset has a tax rate of 40%. Another firm in the same industry, Vim Pop, has an equity beta of 1.2 and a debt to equity ratio of 0.9. Sunset’s debt to equity ratio is 1.5, the risk free rate is 4%, and the excess return on the market is 8%. Assume...
Artie's Wrestling Stuff is considering building a new plant. This plant would require an initial cash...
Artie's Wrestling Stuff is considering building a new plant. This plant would require an initial cash outlay of ​$ 8 million and would generate annual free cash inflows of ​$ 1 million per year for 8 years. Calculate the​ project's MIRR ​given: a. A required rate of return of 9 percent b. A required rate of return of 12 percent c. A required rate of return of 15 percent
GMFC is planning to expand its U.S. operations by building a new plant. They will employ...
GMFC is planning to expand its U.S. operations by building a new plant. They will employ about 500 production workers. This new plant will manufacture motorized recreational equipment including all-terrain vehicles, personal watercraft, and snowmobiles. The equipment will assemble mechanical components produced in other GMFC operations or purchased from suppliers. The new plant will fabricate fiberglass body parts and complete the final assembly process. GMFC would like to operate the new plant union-free. It's likely that the Untied Automobile Workers...
Do an order of magnitude estimate for building a new catalytic cracking plant in the Middle...
Do an order of magnitude estimate for building a new catalytic cracking plant in the Middle East with a capacity of 5000 metric tons/year in 2016.
You’re trying to determine whether to expand your business by building a new manufacturing plant. The...
You’re trying to determine whether to expand your business by building a new manufacturing plant. The plant has an installation cost of $12.6 million, which will be depreciated straight-line to zero over its four-year life. If the plant has projected net income of $1,914,300, $1,967,600, $1,936,000, and $1,389,500 over these four years, respectively, what is the project’s average accounting return (AAR)?
Hawke Skateboards is considering building a new plant. Bob Skerritt, the company's marketing manager, is an...
Hawke Skateboards is considering building a new plant. Bob Skerritt, the company's marketing manager, is an enthusiastic supporter of the new plant. Lucy Liu, the company's chief financial officer, is not so sure that the plant is a good idea. Currently, the company purchases its skateboards from foreign manufacturers. The following figures were estimated regarding the construction of a new plant. Cost of plant                                         $4,000,000    Estimated useful life                               15 years Annual cash inflows                                   4,000,000 Salvage value...
Hawke Skateboards is considering building a new plant. Bob Skerritt, the company's marketing manager, is an...
Hawke Skateboards is considering building a new plant. Bob Skerritt, the company's marketing manager, is an enthusiastic supporter of the new plant. Lucy Liu, the company's chief financial officer, is not so sure that the plant is a good idea. Currently, the company purchases its skateboards from foreign manufacturers. The following figures were estimated regarding the construction of a new plant. Cost of plant $4,000,000 Estimated useful life 15 years Annual cash inflows 4,000,000 Salvage value $2,000,000 Annual cash outflows...
Your firm is considering extending its operations by building a new plant, which will require an...
Your firm is considering extending its operations by building a new plant, which will require an initial investment of $500M. You have determined that the new division will have a 50% chance of generating an annual free cash flow of $120M in perpetuity, a 40% chance of an annual cash flow of $75M in perpetuity and a 10% chance that the division will generate zero (0) cash. Your firm uses 30% debt and 70% equity to finance its operations. Its...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT