There is a new road project which is expected to be finished in 4 years. This...

There is a new road project which is expected to be finished in 4 years. This project has an initial cost of 1 million$. After the initial cost is paid, the road project is expected to provide 250,000$ in year 1, 300,000 in year 2, 320,000 in year 3 and 450,000 in year 4. It is known that the internal rate of return in this project 10.96%. What is the net present value?

Expert Solution

NPV is the difference between cash outlows and discounted cash inflows. IRR is the discount rate where NPV is 0 or very close to 0.

Year	Cash flow	PV factor@ 10.96%	Discounted cash flow
0	(1,000,000)	1	(1,000,000)
1	250,000	0.901225667	225,306
2	300,000	0.812207703	243,662
3	320,000	0.731982429	234,234
4	450,000	0.659681352	296,857
			60

PV factor = 1/(1+r)^t

jeff jeffy answered 1 year ago

1. A company has three new project ideas that are all expected to last 4 years....

1. A company has three new project ideas that are all expected to last 4 years. Unfortunately due to a resource constraint they can only pursue 2 of these projects. Assume the development costs for all projects are paid up front (i.e. prior to the start of the project). The specific financial projections for the three projects are: · Project 1 – Development cost would be $50,000. Projected revenues from the project are $50,000 in the first year with an...

Dow Chemical is considering a project that is expected to last 4 years with the following...

Dow Chemical is considering a project that is expected to last 4 years with the following details: Year 1 revenues of $560,000 increasing at 5% per year thereafter. Costs for year 1 are $200,000 and are expected to increase at 6% per year thereafter. The project will require new equipment valued at $400,000. This equipment will be depreciated to zero using the straight-line depreciation method over the 4-year life. Working capital at the firm will have to rise to $50,000...

What is the EAC of two projects: project A, which costs $150 and is expected to last two years, and project B, which costs $190 and is expected to last three years?

Q2. What is the EAC of two projects: project A, which costs $150 and is expected to last two years, and project B, which costs $190 and is expected to last three years? The cost of capital is 12%. (1 mark) Answer: Q3. A company pays annual dividends of $10.40 with no possibility of it changing in the next several years. If the firm’s stock is currently selling at $80, what is the required rate of return? (1 mark)...

A new project has an intial cost of $480,000 with an expected life of 8 years.

A new project has an intial cost of $480,000 with an expected life of 8 years. The project is expected to have earnings before depreciation and taxes of $125,000 per year. If the projected is being depreciated over a 3-year term and the firm’s tax rate is 40%, calculate the cashflows of the project over its estimated life.

A new gold mining project is expected to operate for 8 years and will require development...

A new gold mining project is expected to operate for 8 years and will require development costs of $200 million at time zero, $160 million at the end of year 1, and $43 million at the end of year 2. Assuming that 100% of the capital costs are to be depreciated using MACRS (.5 year convention) for mining equipment, determine the total allowable depreciation deduction for each year for the project for the entire 0-8 years

A new project will cost $124 million and will have an expected life of 15 years....

A new project will cost $124 million and will have an expected life of 15 years. The project will be depreciated straight-line over a 9-year term. EBDT for the project is expected to be $16 million per year. The firm's tax rate is 25%. Show the expected cash flows per year for the project. Show work

A new project costs $28 million and has an expected life of 12 years. It will...

A new project costs $28 million and has an expected life of 12 years. It will be depreciated straight line over an 7 year term. EBDT per year for the project is $5.5 million and the firm's tax rate is 40%. Show the expected cashflows per year for this project over its life.

A new project has an intial cost of $350,000 with an expected life of 7 years....

A new project has an intial cost of $350,000 with an expected life of 7 years. The project is expected to have earnings before depreciation and taxes of $125,000 per year. If the projected is being depreciated over a 4-year term and the firm’s tax rate is 40%, calculate the cashflows of the project over its estimated life.

Company C is considering a new project that is expected to last for 5 years. Its...

Company C is considering a new project that is expected to last for 5 years. Its marketing group expects annual sales of $40 million for the first year, increasing by $10 million per year for the following four years. Manufacturing costs (i.e., COGS) and operating expenses (excluding depreciation) are expected to be 40% of sales and $7 million, respectively, from years 1-5. Developing the product will require upfront R&D and marketing expenses of $8 million total in period 0. The...

Question: You are starting a new project. This project would last 4 years. The following is...

Question: You are starting a new project. This project would last 4 years. The following is the input information that you have collected: Building cost (1.3% in the first year and then 2.6% every year) $12,000,000 Equipment cost (MACRS 5 years) $8,000,000 Net operating working capital requirement (% of Sales) 10% First year sales (in units) 20,000 Growth rate in units sold 0% Sales price per unit $3,000 Variable cost per unit $2,100 Fixed costs $8,000,000 Market value of building...

Question