Question
In: Finance
Gamma Inc. is looking at a new product line with an installed cost of $520,000. This...
Gamma Inc. is looking at a new product line with an installed
cost of $520,000. This cost will be depreciated straight-line to
$20,000 over the project’s five-year life. At the end of the
project life, the installed machine can be scrapped and sold for
$26,694. The machine will add $185,000 per year as sales and incur
an additional $55,000, but will save $18,524 from the existing
product line. The system requires an initial investment in net
working capital of $32,858. The NWC level will be maintained
throughout the project years and recoverable at the end of the
project. Assume the cost of capital is 6.5%, and Gamma Inc. belongs
the 35% tax bracket. Compute the NPV of the project and determine
whether you will invest in this project.
Solutions
Expert Solution
SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE
jeff jeffy answered 1 year agoRelated Solutions
Gamma Inc. is looking at a new product line with an installed cost of $520,000. This...
Gamma Inc. is looking at a new product line with an installed
cost of $520,000. This cost will be depreciated straight-line to
$20,000 over the project’s five-year life. At the end of the
project life, the installed machine can be scrapped and sold for
$27,265. The machine will add $185,000 per year as sales and incur
an additional $55,000, but will decrease $7,368 from the existing
product line's sales. The system requires an initial investment in
net working capital of...
Gamma Inc. is looking at a new product line with an installed cost of $520,000. This...
Gamma Inc. is looking at a new product line with an installed
cost of $520,000. This cost will be depreciated straight-line to
$20,000 over the project’s five-year life. At the end of the
project life, the installed machine can be scrapped and sold for
$27,644. The machine will add $185,000 per year as sales and incur
an additional $55,000, but will save $22,983 from the existing
product line. The system requires an initial investment in net
working capital of $42,315....
Gamma Inc. is looking at a new product line with an installed cost of $520,000. This...
Gamma Inc. is looking at a new product line with an installed
cost of $520,000. This cost will be depreciated straight-line to
$20,000 over the project’s five-year life. At the end of the
project life, the installed machine can be scrapped and sold for
$27,644. The machine will add $185,000 per year as sales and incur
an additional $55,000, but will save $22,983 from the existing
product line. The system requires an initial investment in net
working capital of $42,315....
Gamma Inc. is looking at a new product line with an installed cost of $520,000. This...
Gamma Inc. is looking at a new product line with an installed
cost of $520,000. This cost will be depreciated straight-line to
$20,000 over the project’s five-year life. At the
end of the project life, the installed machine can be scrapped and
sold for $27,701. The machine will add $185,000 per year as sales
and incur an additional $55,000, but will decrease $9,578 from the
existing product line's sales. The system requires an initial
investment in net working capital of...
Gamma Inc. is looking at a new product line with an installed cost of $520,000. This...
Gamma Inc. is looking at a new product line with an installed
cost of $520,000. This cost will be depreciated straight-line to
$20,000 over the project’s five-year life. At the
end of the project life, the installed machine can be scrapped and
sold for $28,797. The machine will add $185,000 per year as sales
and incur an additional $55,000, but will decrease $6,794 from the
existing product line's sales. The system requires an initial
investment in net working capital of...
Cori's Meats is looking at a new sausage system with an installed cost of $520,000. This...
Cori's Meats is looking at a new sausage system with an
installed cost of $520,000. This cost will be depreciated
straight-line to zero over the project’s five-year life, at the end
of which the sausage system can be scrapped for $78,000. The
sausage system will save the firm $200,000 per year in pretax
operating costs, and the system requires an initial investment in
net working capital of $37,000. If the tax rate is 23 percent and
the discount rate is...
Sage is looking at a new system with an installed cost of $400,800. This cost will...
Sage is looking at a new system with an installed cost of
$400,800. This cost will be depreciated straight-line to zero over
the project's 4-year life, at the end of which the system can be
scrapped for $60,200. The system will save the firm $180,000 per
year in pretax operating costs, and the system requires an initial
investment in net working capital of $38,500. All of the net
working capital will be recovered at the end of the project. The...
The ABC Company is looking at a new piece of equipment with an installed cost of...
The ABC Company is looking at a new piece of equipment
with an installed cost of $187,400. This cost will be depreciated
straight-line to zero over the four-year life. At the end of the
four years the book value will be zero however it can be scrapped
for $25,000. The equipment will save the firm $99,000 per year in
pre-tax operating costs and the equipment requires an initial
investment in net working capital of $9,000 and will be recovered
at...
ABC is looking at purchasing a new machine. The new machine installed cost is $60,000 and...
ABC is looking at purchasing a new machine. The new machine
installed cost is $60,000 and requires minimal increase in NWC (net
working capital). It will be sold at the end of year 3 for an
anticipated $5,000. Use MACRS 3 yr. (Remember to add the terminal
cash flow in when calculating year 3 OCF) Anticipated cash savings
prior to depreciation: Year 1$20,000, Year 2 $30,000, Year 3
$20,000 Calculate the operating cash flows for each year. Tax Rate
is...
Cori's Meats is looking at a new sausage system with an installed cost of $450,000. This...
Cori's Meats is looking at a new sausage system with an
installed cost of $450,000. This cost will be depreciated
straight-line to zero over the project’s five-year life, at the end
of which the sausage system can be scrapped for $64,000. The
sausage system will save the firm $240,000 per year in pretax
operating costs, and the system requires an initial investment in
net working capital of $23,000. If the tax rate is 21 percent and
the discount rate is...
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- "Ethical Considerations" Please respond to the following: Reflect upon the responsibilities placed on auditors by the...
- A Japanese company has a bond outstanding that sells for 93 percent of its ¥100,000 par...
- What is the difference among the principles of modularization, abstraction, encapsulation, and separation of interface and...
- An investment project costs $20,100 and has annual cash flows of $4,400 for six years. ...
- PUT IN JAVA PROGRAMMING The StockB class: Design a class named StockB that contains the following...
- Draw a DFA for the following ( ∑ = {0,1}): Set of all strings with.
- In the article from Forbes notes that the goal of a leader is not to clone...
ADVERTISEMENT