A project has an initial requirement of $89,218 for equipment. The equipment will be depreciated to...

A project has an initial requirement of $89,218 for equipment. The equipment will be depreciated to a zero book value over the 5-year life of the project. The investment in net working capital will be $21,134. All of the net working capital will be recouped at the end of the 5 years. The equipment will have an estimated salvage value of $13,654. The annual operating cash flow is $39,203. The cost of capital is 12 percent. What is the project’s net present value if the tax rate is 39 percent?

Expert Solution

Statement showing Cash flows
Particulars	Time	PVf 12%	Amount	PV
Cash Outflows	-	1.00	(89,218.00)	(89,218.00)
Cash Outflows	-	1.00	(21,134.00)	(21,134.00)
PV of Cash outflows = PVCO				(110,352.00)
Cash inflows	1.00	0.8929	39,203.00	35,002.68
Cash inflows	2.00	0.7972	39,203.00	31,252.39
Cash inflows	3.00	0.7118	39,203.00	27,903.92
Cash inflows	4.00	0.6355	39,203.00	24,914.22
Cash inflows	5.00	0.5674	39,203.00	22,244.84
Cash inflows = recovery of working capital	5.00	0.5674	21,134.00	11,992.00
Cash inflows = Salvage Value =13654*(1-.39)	5.00	0.5674	8,328.94	4,726.06
PV of Cash Inflows =PVCI				158,036.10
NPV= PVCI - PVCO				47,684.10

jeff jeffy answered 2 years ago

A project has an initial requirement of $62532 for equipment. The equipment will be depreciated to...

A project has an initial requirement of $62532 for equipment. The equipment will be depreciated to a zero book value over the 5-year life of the project. The investment in net working capital will be $24926. All of the net working capital will be recouped at the end of the 5 years. The equipment will have an estimated salvage value of $13096. The annual operating cash flow is $56978. The cost of capital is 14 percent. What is the project’s...

Part A A new project has an initial cost of $142,000. The equipment will be depreciated...

Part A A new project has an initial cost of $142,000. The equipment will be depreciated on a straight-line basis to a book value of $45,000 at the end of the four-year life of the project. The projected net income each year is $14,300, $17,600, $22,400, and $14,200, respectively. What is the average accounting return? Part B You are evaluating two projects with the following cash flows: Year Project X Project Y 0 −$540,600 −$511,000 1 219,700 209,400 2 229,600...

A project has an initial requirement of $191013 for new equipment and $13286 for net working...

A project has an initial requirement of $191013 for new equipment and $13286 for net working capital. The installation costs to get the new equipment in working condition are 3728. The fixed assets will be depreciated to a zero book value over the 5-year life of the project and have an estimated salvage value of $72103. All of the net working capital will be recouped at the end of the project. The annual operating cash flow is $94903 and the...

A project has an initial requirement of $205,268 for new equipment and $14,020 for net working...

A project has an initial requirement of $205,268 for new equipment and $14,020 for net working capital. The installation costs to get the new equipment in working condition are 14,481. The fixed assets will be depreciated to a zero book value over the 5-year life of the project and have an estimated salvage value of $77,779. All of the net working capital will be recouped at the end of the project. The annual operating cash flow is $80,130 and the...

A project has an initial requirement of $176,772 for new equipment and $11,134 for net working...

A project has an initial requirement of $176,772 for new equipment and $11,134 for net working capital. The installation costs are expected to be $14,442. The fixed assets will be depreciated to a zero book value over the 4-year life of the project and have an estimated salvage value of $123,456. All of the net working capital will be recouped at the end of the project. The annual operating cash flow is $88,581 and the cost of capital is 10%...

A project has an initial requirement of $230,294 for new equipment and $10,145 for net working...

A project has an initial requirement of $230,294 for new equipment and $10,145 for net working capital. The installation costs to get the new equipment in working condition are 5,997. The fixed assets will be depreciated to a zero book value over the 5-year life of the project and have an estimated salvage value of $116,602. All of the net working capital will be recouped at the end of the project. The annual operating cash flow is $118,381 and the...

A project has an initial requirement of $219,312 for new equipment and $14,180 for net working...

A project has an initial requirement of $219,312 for new equipment and $14,180 for net working capital. The installation costs are expected to be $13,506. The fixed assets will be depreciated to a zero book value over the 4-year life of the project and have an estimated salvage value of $94,642. All of the net working capital will be recouped at the end of the project. The annual operating cash flow is $51,197 and the cost of capital is 5%...

A project has an initial requirement of $190,151 for new equipment and $11,289 for net working...

A project has an initial requirement of $190,151 for new equipment and $11,289 for net working capital. The installation costs are expected to be $15,824. The fixed assets will be depreciated to a zero book value over the 4-year life of the project and have an estimated salvage value of $77,787. All of the net working capital will be recouped at the end of the project. The annual operating cash flow is $78,979 and the cost of capital is 14%...

A project has an initial requirement of $195,422 for new equipment and $14,626 for net working...

A project has an initial requirement of $195,422 for new equipment and $14,626 for net working capital. The installation costs to get the new equipment in working condition are 2,873. The fixed assets will be depreciated to a zero book value over the 5-year life of the project and have an estimated salvage value of $115,708. All of the net working capital will be recouped at the end of the project. The annual operating cash flow is $76,206 and the...

A project has an initial requirement of $206,204 for new equipment and $8,111 for net working...

A project has an initial requirement of $206,204 for new equipment and $8,111 for net working capital. The installation costs are expected to be $10,540. The fixed assets will be depreciated to a zero book value over the 4-year life of the project and have an estimated salvage value of $110,343. All of the net working capital will be recouped at the end of the project. The annual operating cash flow is $70,468 and the cost of capital is 11%...

Question