Question
In: Finance
Simmons, Inc., is considering a new 4-year project that requires an initial fixed asset investment of...
Simmons, Inc., is considering a new 4-year project that requires an initial fixed asset investment of $3.7 million. The fixed asset is eligible for 100 percent bonus depreciation in the first year. At the end of the project, the asset can be sold for $465,000. The project is expected to generate $3.3 million in annual sales, with annual expenses of $980,000. The project will require an initial investment of $515,000 in NWC that will be returned at the end of the project. The corporate tax rate is 22 and the project has a required return of 14 percent.
What is the NPV of the project?
Solutions
Expert Solution
Solution :-
Net Annual Savings = $3,300,000 - $980,000 = $2,320,000
After tax Salvage Value = $465,000 * ( 1 - 0.22 ) = $362,700
Therefore
NPV of the Project = $2,291,358
If there is any doubt please ask in comments
Thank you please rate
jeff jeffy answered 1 year agoRelated Solutions
Simmons, Inc., is considering a new 4-year project that requires an initial fixed asset investment of...
Simmons, Inc., is considering a new 4-year project that requires
an initial fixed asset investment of $3.1 million. The fixed asset
is eligible for 100 percent bonus depreciation in the first year.
At the end of the project, the asset can be sold for $425,000. The
project is expected to generate $2.9 million in annual sales, with
annual expenses of $940,000. The project will require an initial
investment of $475,000 in NWC that will be returned at the end of...
Simmons, Inc., is considering a new 4-year project that requires an initial fixed asset investment of...
Simmons, Inc., is considering a new 4-year project that requires
an initial fixed asset investment of $3.5 million. The fixed asset
is eligible for 100 percent bonus depreciation in the first year.
At the end of the project, the asset can be sold for $445,000. The
project is expected to generate $3.1 million in annual sales, with
annual expenses of $960,000. The project will require an initial
investment of $495,000 in NWC that will be returned at the end of...
Simmons, Inc., is considering a new 4-year project that requires an initial fixed asset investment of...
Simmons, Inc., is considering a new 4-year project that requires
an initial fixed asset investment of $2.7 million. The fixed asset
is eligible for 100 percent bonus depreciation in the first year.
At the end of the project, the asset can be sold for $385,000. The
project is expected to generate $2.5 million in annual sales, with
annual expenses of $900,000. The project will require an initial
investment of $435,000 in NWC that will be returned at the end of...
Simmons, Inc., is considering a new 4-year project that requires an initial fixed asset investment of...
Simmons, Inc., is considering a new 4-year project that requires
an initial fixed asset investment of $3.65 million. The fixed asset
is eligible for 100 percent bonus depreciation in the first year.
At the end of the project, the asset can be sold for $460,000. The
project is expected to generate $3.25 million in annual sales, with
annual expenses of $975,000. The project will require an initial
investment of $510,000 in NWC that will be returned at the end of...
Simmons, Inc., is considering a new 4-year project that requires an initial fixed asset investment of...
Simmons, Inc., is considering a new 4-year project that requires
an initial fixed asset investment of $2.65 million. The fixed asset
is eligible for 100 percent bonus depreciation in the first year.
At the end of the project, the asset can be sold for $395,000. The
project is expected to generate $2.45 million in annual sales, with
annual expenses of $950,000. The project will require an initial
investment of $420,000 in NWC that will be returned at the end of...
Explorer, Inc. is considering a new 4-year project that requires an initial fixed asset (equipment) investment...
Explorer, Inc. is considering a new 4-year project that requires
an initial fixed asset (equipment) investment of $200,000. The
fixed asset is three-year MACRS property for tax purposes. In four
years, the equipment will be worth about half of what we paid for
it. The project is estimated to generate $500,000 in annual sales,
with costs of $400,000. The firm has to invest $100,000 in net
working capital at the start. After that, net working capital
requirements will be 25...
"Explorer, Inc. is considering a new 4-year project that requires an initial fixed asset (equipment) investment...
"Explorer, Inc. is considering a new 4-year project that
requires an initial fixed asset (equipment) investment of $200,000.
The fixed asset is three-year MACRS property for tax purposes. In
four years, the equipment will be worth about half of what we paid
for it. The project is estimated to generate $500,000 in annual
sales, with costs of $400,000. The firm has to invest $100,000 in
net working capital at the start. After that, net working capital
requirements will be 25...
Your company is considering a new 4-year project that requires an initial fixed asset investment of...
Your company is considering a new 4-year project that requires
an initial fixed asset investment of $3.25 million. The fixed asset
is eligible for 100 percent bonus depreciation in the first year
(which means can all be depreciated in year 1). At the end of the
project, the asset can be sold for $440,000. The project is
expected to generate $3.05 million in annual sales, with annual
expenses of $955,000. The project will require an initial
investment of $490,000 in...
Quad Enterprises is considering a new 4-year expansion project that requires an initial fixed asset investment...
Quad Enterprises is considering a new 4-year expansion project
that requires an initial fixed asset investment of $2.322 million.
The fixed asset will be depreciated straight-line to zero over its
4-year tax life, after which time it will be worthless. The project
is estimated to generate $2,064,000 in annual sales, with costs of
$825,600.
If the tax rate is 25 percent, what is the OCF for this
project?
Multiple Choice
$493,425
$1,020,229
$1,127,621
$1,238,400
$1,073,925
Bentley Mews is considering a new 4-year expansion project that requires an initial fixed asset investment...
Bentley Mews is considering a new 4-year expansion project that
requires an initial fixed asset investment of $3 million. The fixed
asset will be depreciated straight-line to zero over its 4-year tax
life, after which time it will be sold. Assume it will be sold for
$231,000, its estimated market value at the end of four years. The
project requires an initial investment in net working capital of
$330,000, all of which will be recovered at the end of the...
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- This is all one question, thank you so much in advance! You must evaluate the purchase...
- 10. Consider a market in which there is a monopoly manufacturer and a mo nopoly retailer....
- Write a function fun(x) that takes as input a positive number x and solves the following...
- Describe the principles and operations of movement sensors: Doppler-Effect Velocity sensor and Spring-Mass Accelerometor; State the...
- This is all one question, thank you so much in advance. The Bigbee Bottling Company is...
- For Questions 1-3: consider the following code: public class A { private int number; protected String...
- You are tasked with assessing the health department’s intervention program in preventing recurrence of acute alcohol...
ADVERTISEMENT