Question
In: Finance
The following table presents sales forecasts for Golden Gelt Giftware. The unit price is $40. The...
The following table presents sales forecasts for Golden Gelt Giftware. The unit price is $40. The unit cost of the giftware is $20.
| Year | Unit Sales |
| 1 |
34,000 |
| 2 |
42,000 |
| 3 |
16,000 |
| 4 |
10,000 |
| Thereafter |
0 |
It is expected that net working capital will amount to 20% of sales in the following year. For example, the store will need an initial (Year 0) investment in working capital of .20 × 34,000 × $40 = $272,000. Plant and equipment necessary to establish the giftware business will require an additional investment of $212,000. This investment will be depreciated using MACRS and a 3-year life. After 4 years, the equipment will have an economic and book value of zero. The firm’s tax rate is 21%. What is the net present value of the project? The discount rate is 20%. Use the MACRS depreciation schedule. (Do not round intermediate calculations. Round your answer to the nearest whole dollar amount.)
Solutions
Expert Solution
Operating cash flow (OCF) each year = income after tax + depreciation - investment in working capital
NPV is calculated using NPV function in Excel
NPV is $835,976
jeff jeffy answered 2 years agoRelated Solutions
The following table presents sales forecasts for Golden Gelt Giftware. The unit price is $40. The...
The following table presents sales forecasts for Golden Gelt
Giftware. The unit price is $40. The unit cost of the giftware is
$30.
Year Unit Sales
1 - 36,000
2 - 44,000
3 - 13,000
4 - 7,000
Thereafter 0
It is expected that net working capital will amount to 20% of
sales in the following year. For example, the store will need an
initial (Year 0) investment in working capital of .20 × 36,000 ×
$40 = $288,000. Plant...
The following table presents sales forecasts for Golden Gelt Giftware. The unit price is $40. The...
The following table presents sales forecasts for Golden Gelt
Giftware. The unit price is $40. The unit cost of the giftware is
$20.
Year
Unit Sales
1
40,000
2
45,000
3
17,000
4
10,000
Thereafter
0
It is expected that net working capital will amount to 20% of
sales in the following year. For example, the store will need an
initial (Year 0) investment in working capital of .20 × 40,000 ×
$40 = $320,000. Plant and equipment necessary to...
The following table presents sales forecasts for Golden Gelt Giftware. The unit price is $50. The...
The following table presents sales forecasts for Golden Gelt
Giftware. The unit price is $50. The unit cost of the giftware is
$30. Year Unit Sales 1 31,000 2 39,000 3 13,000 4 7,000 Thereafter
0 It is expected that net working capital will amount to 20% of
sales in the following year. For example, the store will need an
initial (Year 0) investment in working capital of .20 × 31,000 ×
$50 = $310,000. Plant and equipment necessary to...
The following table presents sales forecasts for Golden Gelt Giftware. The unit price is $30. The...
The following table presents sales forecasts for Golden Gelt
Giftware. The unit price is $30. The unit cost of the giftware is
$20.
Year Unit Sales
1 27,000
2 35,000
3 19,000
4 10,000
Thereafter 0
It is expected that net working capital will amount to 20% of
sales in the following year. For example, the store will need an
initial (Year 0) investment in working capital of .20 × 27,000 ×
$30 = $162,000. Plant and equipment necessary to...
The following table presents sales forecasts for Golden Gelt Giftware. The unit price is $20. The...
The following table presents sales forecasts for Golden Gelt
Giftware. The unit price is $20. The unit cost of the giftware is
$10.
Year
Unit Sales
1
32,000
2
40,000
3
14,000
4
8,000
Thereafter
0
It is expected that net working capital will amount to 20% of
sales in the following year. For example, the store will need an
initial (Year 0) investment in working capital of .20 × 32,000 ×
$20 = $128,000. Plant and equipment necessary...
Price of eggs and milk: The following table presents the average price in dollars for a...
Price of eggs and milk: The following table
presents the average price in dollars for a dozen eggs and a gallon
of milk for each month from February through November
2001. Use a TI-84 calculator to answer the following.
Dozen Eggs
Gallon of Milk
1.21
2.66
1.13
2.67
1.01
2.69
1.20
2.68
1.15
2.71
1.28
2.67
1.26
2.90
1.33
2.91
1.45
2.94
1.56
2.95
If the price of eggs differs by $0.30 from one month to the
next, by how...
Price of eggs and milk: The following table presents the average price in dollars for a...
Price of eggs and milk: The following table
presents the average price in dollars for a dozen eggs and a gallon
of milk for each month from January through October
2010
.
Dozen Eggs
Gallon of Milk
1.79
3.12
1.77
2.69
1.28
3.76
1.78
2.78
0.88
3.00
0.98
3.08
1.15
3.31
1.05
3.15
1.86
2.94
1.83
2.73
If the price of eggs differs by $0.25 from one month to the
next, by how much would you expect the price of...
The following table presents information for Golden Fleece Financial. Long-term debt outstanding $ 470,000 Current yield...
The following table presents information for Golden Fleece
Financial.
Long-term debt outstanding
$
470,000
Current yield to maturity on debt
9.00
%
Number of shares of common stock
18,500
Price per share
$
67
Book value per share
$
42
Expected rate of return on stock
18.00
%
Calculate the company cost of capital.
Compute the missing amounts for the following table. A Sales price per unit $1,800 Variable costs...
Compute the missing amounts for the following table.
A
Sales price per unit
$1,800
Variable costs per unit
720
Total fixed costs
669,600
Target profit
1,188,000
Calculate:
Contribution margin per unit
Contribution margin ratio
Required units to break even
Required sales dollars to break even
Required units to achieve target profit
B
$10
6
60,000
75,000
C
$5,000
3,750
1,187,500
1,875,000
(Click the icon to view the table.)
Compute the missing amounts. (Enter the contribution margin
ratio to nearest percent,...
The following table presents the average price in dollars for a dozen eggs and a gallon...
The following table
presents the average price in dollars for a dozen eggs and a gallon
of milk for each month in a recent year.
Dozen
Eggs
Gallon of
Milk
1.94
3.58
1.80
3.52
1.77
3.50
1.83
3.47
1.69
3.43
1.67
3.40
1,65
3.43
1.88
3.47
1.89
3.47
1.96
3.52
1.96
3.54
2.01
3.58
If a linear regression
model were fit, what is the value of the slope and the value of the
y-intercept? Please round to 3 decimal places...
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