Question
In: Finance
Assume the following information relating to an investment opportunity: Initial cost = $20,000,000 (all depreciable) Economic...
Assume the following information relating to an investment opportunity: Initial cost = $20,000,000 (all depreciable) Economic life of project = 4 years Depreciation by the straight-line method Units sold/year = 1,000,000 Product price = $25/unit Product variable cost = $15/unit Fixed costs of operations (not including depreciation) = $1,000,000/year Tax rate = 30% Required return = 13%
What is the annual net cash flow for this opportunity? - Answer is 7,800,000
What is the project's net present value? Round your answer to whole dollars. -?
What is the internal rate of return on this opportunity? Express your answer in three decimals (i.e. 0.XXX) -?
Solutions
jeff jeffy answered 1 year agoRelated Solutions
Project A: This project requires an initial investment of $20,000,000 in equipment which will cost an...
Project A: This project requires an initial investment of
$20,000,000 in equipment which will cost an additional $3,000,000
to install. The firm will use the attached MACRS depreciation
schedule to expense this equipment. Once the equipment is
installed, the company will need to increase raw goods inventory by
$5,000,000, but it will also see an increase in accounts payable
for $1,500,000. With this investment, the project will last 6 years
at which time the market value for the equipment will...
1. Machine Enterprises is considering an investment proposal with the following cash flows: Initial investment-depreciable assets...
1. Machine Enterprises is considering an investment proposal
with the following cash flows:
Initial investment-depreciable assets
$45,000
Net cash inflows from operations (per year for 10 years)
5,000
Disinvestment
0
Determine the accounting rate of return on initial investment
and the accounting rate of return on average investment.
2. Great Texas is considering a capital expenditure proposal
that requires an initial investment of $9,460, has predicted cash
inflows of $2,000 per year for 16 years, and has no salvage value....
A project requires an initial investment of $20,000,000. The life of the project is 3 years....
A project requires an initial investment of $20,000,000. The
life of the project is 3 years. The $20,000,000 investment will be
depreciated using the three-year modified accelerated cost recovery
system (MACRS) class (see the table below). The firm estimates
that, in the first year, the revenues and total production costs
will be $60,000,000 and $45,000,000, respectively, in nominal
terms. After that the sales and production costs are expected to
increase at the inflation rate of 4 percent per year over...
Project B: This project requires an initial investment of $20,000,000 in equipment which will require additional...
Project B: This project requires an initial investment of
$20,000,000 in equipment which will require additional expense of
$1,000,000 to install in the current facility. Consistent with
other projects, the equipment will be depreciated using the MACRS
Investment Class schedule. Once installed, the firm will need to
increase inventory by $6,000,000. The project will last 6 years,
but at the end of that period, the equipment will have no salvage
value. During the operational period of this project, the product...
You are considering an investment opportunity that requires an initial investment of $18,000 and is expected...
You are considering an investment opportunity that requires an
initial investment of $18,000 and is expected to provide an annual
cash flows of $1,450 for the first three years, then an annual cash
flow of $1,620 for the next four years, then a final cash flow of
$24,000 one year later. If your required rate of return is 9%, what
is net present value of this opportunity?
Enter your answer rounded to the nearest penny but do not
include any...
Consider the following projects and assume an opportunity cost of capital of 12%.
Consider the following projects and assume an opportunity cost of capital of 12%. a. Calculate the Net Present Value (NPV) of each project. Which is to be preferred and why?(8 marks)b. If there is a capital constraint in place which limits spending to £10,000, which project or projects should be selected? Support your answer with calculations.
Assume that you are an investment analyst preparing an analysis of an investment opportunity for a...
Assume that you are an investment analyst preparing an analysis
of an investment opportunity for a client. Your client is
considering the acquisition of an apartment complex from a
developer at the point in time when the apartments are ready for
first occupancy. You have developed the following information.
1) Number of units = 40
2) First year market rent per unit = $430 per month
3) Rent is projected to increase by 8% each year
4) Annual vacancy rate...
Assume that you are an investment analyst preparing an analysis of an investment opportunity for a...
Assume that you are an investment analyst preparing an
analysis of an investment opportunity for a client. Your client is
considering the acquisition of an apartment complex from a
developer at the point in time when the apartments are ready for
first occupancy. Your have developed the following
information.
1)Number of units = 36
2)First year market rent per unit = $450 per month
3)Rent is projected to increase by 8% each year
4)Annual vacancy rate = 3% of PGI...
Assume that you are an investment analyst preparing an analysis of an investment opportunity for a...
Assume that you are an investment analyst preparing an analysis
of an investment opportunity for a client. Your client is
considering the acquisition of an apartment complex from a
developer at the point in time when the apartments are ready for
first occupancy. Your have developed the following information.
1) Number of units = 36
2) First year market rent per unit = $450 per month
3) Rent is projected to increase by 8% each year
4) Annual vacancy rate...
Assume that you are an investment analyst preparing an analysis of an investment opportunity for a...
Assume that you are an investment analyst preparing an analysis
of an investment opportunity for a client. Your client is
considering the acquisition of an apartment complex from a
developer at the point in time when the apartments are ready for
first occupancy. Your have developed the following information.
1) Number of units = 36
2) First year market rent per unit = $450 per month
3) Rent is projected to increase by 8% each year
4) Annual vacancy rate...
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