Ford factory wants to produce twin carburetor with a preliminary investment of $10million pounds. Jack predict...

Ford factory wants to produce twin carburetor with a preliminary investment of $10million pounds. Jack predict that an additional investment of $4 million pounds will beneeded every 3 years to modernize the factory. This factory is anticipated to start producing carburetor 2 years after the first investment is made (at the start of the third year). Incomes of $5million pound per year are estimated to start to flow at the start of the fourth year. Operating and maintenance costs are anticipated to be $2 million pound per year. This factory has a 15 year life.a) Draw cash flow diagram.b)Determine the NPV of the factory with the interest rate is 10% per year, compounded yearly?c) Is the factory defined in the problem an economically suitable investment?

Expert Solution

Rahul Sunny answered 2 years ago

Beats wants to build a new factory to produce its headphones. It will cost $230 million...

Beats wants to build a new factory to produce its headphones. It will cost $230 million initially to build the factory over the course of 12 months, which will be worthless after 10 years. The factory will be depreciated linearly to $0 over 10 years. Beats already owns the land on which the factory will be built. The land is currently worth $10 million and was purchased for $2 million eight years ago. After completion of the factory at the...

A clothes factory wants to produce school uniforms for high school students. To get an idea...

A clothes factory wants to produce school uniforms for high school students. To get an idea on the sizes of the clothes the factory collected data on the height of 30 high school students. The data are measured in centimeters and recorded in the following table. Student # Height Student # Height 1 150 16 168 2 156 17 159 3 162 18 163 4 153 19 177 5 166 20 172 6 157 21 162 7 168 22 174...

A firm wants to finance an investment that would produce an annual EBIT of $415,000 by...

A firm wants to finance an investment that would produce an annual EBIT of $415,000 by issuing 850 ten-year zero-coupon bonds (each with $1,000 face value) that will be charged a market interest rate of 8%. Suppose the bonds will be issued on January 1, 2020 and will mature on December 31, 2029. Assume EBIT is constant over time at $415,000 and the tax rate is 35%. Shown below are income statement templates for the years 2020 and 2029. You...

ABC Company wants to produce 1.35 million units per year of a product. Investment cost is...

ABC Company wants to produce 1.35 million units per year of a product. Investment cost is 27.5 million dollars and the project falls under the 7 year MACRS class life with a salvage value of of 2.75 million at the end of 6 years. The average price for each unit is $90. Annual expected sales are shown below. Year. 2020. 2021. 2022. 2023. 2024. 2025 Volume. 600. . 750 1000. 1200. 1200. 1200 Material cost for each unit is $25...

Question