Question

In: Finance

White Mountain Industrial is considering a project that would last for 2 years. The project would...

White Mountain Industrial is considering a project that would last for 2 years. The project would involve an initial investment of 107,000 dollars for new equipment that would be sold for an expected price of 78,000 dollars at the end of the project in 2 years. The equipment would be depreciated to 19,000 dollars over 4 years using straight-line depreciation. In years 1 and 2, relevant annual revenue for the project is expected to be 104,000 dollars per year and relevant annual costs for the project are expected to be 23,000 dollars per year. The tax rate is 50 percent and the cost of capital for the project is 7.94 percent. What is the net present value of the project?

Solutions

Expert Solution

Following is the Excel sheet of calculation of NPV of the project:-

Following is the Formula sheet of above excel worksheet for easy understanding of the calculations:-


Related Solutions

White Mountain Packaging is considering a project that would last for 2 years. The project would...
White Mountain Packaging is considering a project that would last for 2 years. The project would involve an initial investment of 195,000 dollars for new equipment that would be sold for an expected price of 168,000 dollars at the end of the project in 2 years. The equipment would be depreciated to 27,000 dollars over 7 years using straight-line depreciation. In years 1 and 2, relevant annual revenue for the project is expected to be 170,000 dollars per year and...
White Mountain Consulting is considering a project that would last for 2 years and have a...
White Mountain Consulting is considering a project that would last for 2 years and have a cost of capital of 17.72 percent. The relevant level of net working capital for the project is expected to be 21,000 dollars immediately (at year 0); 32,000 dollars in 1 year; and 0 dollars in 2 years. Relevant expected revenue, costs, depreciation, and cash flows from capital spending in years 0, 1, and 2 are presented in the following table (in dollars). The tax...
Silver Sun Industrial is considering a project that would last for 3 years and have a...
Silver Sun Industrial is considering a project that would last for 3 years and have a cost of capital of 14.36 percent. The relevant level of net working capital for the project is expected to be 24,000 dollars immediately (at year 0); 7,000 dollars in 1 year; 36,000 dollars in 2 years; and 0 dollars in 3 years. Relevant expected operating cash flows and cash flows from capital spending in years 0, 1, 2, and 3 are presented in the...
Red Royal Recycling is considering a project that would last for 2 years. The project would...
Red Royal Recycling is considering a project that would last for 2 years. The project would involve an initial investment of 104,000 dollars for new equipment that would be sold for an expected price of 104,000 dollars at the end of the project in 2 years. The equipment would be depreciated to 27,000 dollars over 7 years using straight-line depreciation. In years 1 and 2, relevant annual revenue for the project is expected to be 91,000 dollars per year and...
Red Royal Recycling is considering a project that would last for 2 years. The project would...
Red Royal Recycling is considering a project that would last for 2 years. The project would involve an initial investment of 104,000 dollars for new equipment that would be sold for an expected price of 104,000 dollars at the end of the project in 2 years. The equipment would be depreciated to 27,000 dollars over 7 years using straight-line depreciation. In years 1 and 2, relevant annual revenue for the project is expected to be 91,000 dollars per year and...
ndigo River Entertainment is considering a project that would last for 2 years. The project would...
ndigo River Entertainment is considering a project that would last for 2 years. The project would involve an initial investment of 79,000 dollars for new equipment that would be sold for an expected price of 65,000 dollars at the end of the project in 2 years. The equipment would be depreciated to 23,000 dollars over 4 years using straight-line depreciation. In years 1 and 2, relevant annual revenue for the project is expected to be 77,000 dollars per year and...
Yellow Sand Consulting is considering a project that would last for 2 years. The project would...
Yellow Sand Consulting is considering a project that would last for 2 years. The project would involve an initial investment of 93,000 dollars for new equipment that would be sold for an expected price of 78,000 dollars at the end of the project in 2 years. The equipment would be depreciated to 23,000 dollars over 7 years using straight-line depreciation. In years 1 and 2, relevant annual revenue for the project is expected to be 90,000 dollars per year and...
Blue Eagle Technology is considering a project that would last for 2 years. The project would...
Blue Eagle Technology is considering a project that would last for 2 years. The project would involve an initial investment of 149,000 dollars for new equipment that would be sold for an expected price of 134,000 dollars at the end of the project in 2 years. The equipment would be depreciated to 21,000 dollars over 8 years using straight-line depreciation. In years 1 and 2, relevant annual revenue for the project is expected to be 136,000 dollars per year and...
Blue Eagle Technology is considering a project that would last for 2 years. The project would...
Blue Eagle Technology is considering a project that would last for 2 years. The project would involve an initial investment of 92,000 dollars for new equipment that would be sold for an expected price of 78,000 dollars at the end of the project in 2 years. The equipment would be depreciated to 20,000 dollars over 4 years using straight-line depreciation. In years 1 and 2, relevant annual revenue for the project is expected to be 80,000 dollars per year and...
Silver Sun Media is considering a project that would last for 2 years. The project would...
Silver Sun Media is considering a project that would last for 2 years. The project would involve an initial investment of 104,000 dollars for new equipment that would be sold for an expected price of 84,000 dollars at the end of the project in 2 years. The equipment would be depreciated to 24,000 dollars over 4 years using straight-line depreciation. In years 1 and 2, relevant annual revenue for the project is expected to be 85,000 dollars per year and...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT