Question
In: Accounting
Products Inc. is analysing a 5 -year project that produces sales of £100 million per year...
Products Inc. is analysing a 5 -year project that produces sales of £100 million per year (in years 1 through 5). Under the assumption that accounts receivable are 10% of current year sales, the project has a positive NPV of £5 million. However, the management is concerned that customers will pay at a slower rate, which will put accounts receivable for the project at 20% of current year sales. The project’s discount rate is 10%. The NPV of the project under this alternative scenario is closest to
a. £1.55 million b. £4 million
c. £2.7 million
d. Not enough information is provided
Solutions
ekkarill92 answered 1 year agoRelated Solutions
Consider a project to supply 100 million postage stamps per year to the USPS for the...
Consider a project to supply 100 million postage stamps per year
to the USPS for the next five years. To pursue the project, you
will need to install $4.1 million in new manufacturing plant and
equipment. This will be depreciated straight-line to zero over the
project’s five years. The equipment can be sold for $540,000 at the
end of the project. You will also need $600,000 in initial net
working capital for the project and an additional investment of
$50,000...
Consider a project to supply 100 million postage stamps per year to the USPS for the...
Consider a project to supply 100 million postage stamps per year
to the USPS for the next five years. To pursue the project, you
will need to install $4.1 million in new manufacturing plant and
equipment. This will be depreciated straight-line to zero over the
project’s five years. The equipment can be sold for $540,000 at the
end of the project. You will also need $600,000 in initial net
working capital for the project and an additional investment of
$50,000...
Consider a project to supply 100 million postage stamps per year to the USPS for the...
Consider a project to supply 100 million postage stamps per year
to the USPS for the next five
years. To pursue the project, you will need to install $4.1
million in new manufacturing plant
and equipment. This will be depreciated straight-line to zero
over the project’s five years. The
equipment can be sold for $540,000 at the end of the project.
You will also need $600,000 in
initial net working capital for the project and an additional
investment of $50,000...
Consider a project to supply 100 million postage stamps per year to the USPS for the...
Consider a project to supply 100 million postage stamps
per year to the USPS for the next five years. To pursue the
project, you will need to install $4.1 million in new manufacturing
plant and equipment. This will be depreciated straight-line to zero
over the project’s five years. The equipment can be sold for
$540,000 at the end of the project. You will also need $600,000 in
initial net working capital for the project and an additional
investment of $50,000...
Initial Cash flow investment Project A $5 million $2 million per year for four years Project...
Initial Cash flow
investment
Project A $5 million $2 million per year for
four years
Project B $3 million $1 million per year for five
years
Project C $2 million $1 million per year for four
years
Project D $3 million $1.5 million per year for
three years
An investor has a budget of $5 million. He can invest in the
projects shown above. If the cost of capital is 6%, what investment
or investments should he make?
Select one:...
Bid Price - Consider a project to supply 100 million postage per year to the Postal...
Bid Price - Consider a project to supply 100 million postage per
year to the Postal Service for the next five years. You have an
idle parcel of land available that cost $750,000 five years ago; if
the land were sold today, it would net you $1,125,000 aftertax. The
land can be sold for $1,295,000 after taxes in five years. You will
need to install $5.1 million in new manufacturing plant and
equipment to actually produce the stamps; this plant...
Consider a project to supply 100 million postage stamps per year to the US Postal Service...
Consider a project to supply 100 million postage stamps per year
to the US Postal Service for the next five years. You have an idle
parcel of land available that cost $750,000.00 5 years ago; if the
land were sold today it would net you $1,125,000 after-tax the land
can be sold for $1,295,000 after tax in five years you will need to
install 5.1 million in new manufacturing plant and equipment to
actually produce the stamps this plant and...
Consider a project to supply 100 million postage stamps per year to the US postal service...
Consider a project to supply 100 million postage stamps per year
to the US postal service for the next five years you have an ideal
parcel of land available that cost $7500000 five years ago; if the
land were sold today it would net you 1125000 after tax. The land
can be sold for 1295000 after in five years. You will need install
5.1 million in new manufacturing plant and equipment to actually
produce the stamps. This plant and equipment...
Consider a project to supply 100 million postage stamps per year to the U.S. Postal Service...
Consider a project to supply 100 million postage stamps per year
to the U.S. Postal Service for the next five years. You have an
idle parcel of land available that cost $1,705,000 five years ago;
if the land were sold today, it would net you $1,780,000 aftertax.
The land can be sold for $1,748,000 after taxes in five years. You
will need to install $5.35 million in new manufacturing plant and
equipment to actually produce the stamps; this plant and...
A 5-year project is expected to generate annual sales of 9,600 units at a price of $83 per
A 5-year project is expected to generate annual sales of 9,600 units at a price of $83 per unit and a variable cost of $54 per unit. The equipment necessary for the project will cost $373,000 and will be depreciated on a straight-line basis over the life of the project. Fixed costs are $225,000 per year and the tax rate is 22 percent. How sensitive is the operating cash flow to a $1 change in the per unit sales price?
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