The Spoon Restaurant is considering a project with an initial cost of $725,000. Then the project...

The Spoon Restaurant is considering a project with an initial cost of $725,000. Then the project will not produce any cash flows for the first two years. Starting in year three, the project will produce cash inflows of $721,000 a year for three years. This project is risky, so the firm has assigned it a discount rate of 18 percent. What is the project's net present value? Show calculations.

Solutions

Expert Solution

jeff jeffy answered 1 year ago

Next > < Previous

Related Solutions

Daniel's Market is considering a project with an initial cost of $176,500. The project will not...

Daniel's Market is considering a project with an initial cost of $176,500. The project will not produce any cash flows for the first three years. Starting in Year 4, the project will produce cash inflows of $127,500 a year for three years. This project is risky, so the firm has assigned it a discount rate of 17 percent. What is the project's net present value?

The Golden Goose is considering a project with an initial cost of $46,700. The project will...

The Golden Goose is considering a project with an initial cost of $46,700. The project will produce cash inflows of $10,000 a year for the first two years and $12,000 a year for the following three years. What is the payback period?

The Red Duck is considering a project with an initial cost of $42,700. The project will...

The Red Duck is considering a project with an initial cost of $42,700. The project will produce cash inflows of $8,000 a year for the first two years and $12,000 a year for the following three years. What is the payback period? Group of answer choices 5.24 years 2.23 years 4.23 years 3.24 years

A company is considering investing in a project with an initial cost of $250,000. The cost...

A company is considering investing in a project with an initial cost of $250,000. The cost of capital is 15%. The project will generate $100,000 every year for four years. Calculate the NPV & IRR & determine if they should invest in this project.

Beta Industries is considering a project with an initial cost of $6.9 million. The project will...

Beta Industries is considering a project with an initial cost of $6.9 million. The project will produce cash inflows of $1.52 million a year for seven years. The firm uses the subjective approach to assign discount rates to projects. For this project, the subjective adjustment is +2.2 percent. The firm has a pretax cost of debt of 9.1 percent and a cost of equity of 17.7 percent. The debt-equity ratio is .57 and the tax rate is 34 percent. What...

Alpha Industries is considering a project with an initial cost of $8.1 million. The project will...

Alpha Industries is considering a project with an initial cost of $8.1 million. The project will produce cash inflows of $1.46 million per year for 9 years. The project has the same risk as the firm. the firm has a pretax cost of debt of 5.64% and a cost of equity of 11.29%. The debt-equity ratio is .61 and the tax rate is 39 percent. A. Should the Firm accept the project? B.Calculate the Firms WACC

Aramark is considering a 3-year project with an initial cost of $570,000. The project will not...

Aramark is considering a 3-year project with an initial cost of $570,000. The project will not directly produce any sales but will reduce operating costs by $147,000 a year. The equipment is classified as MACRS 7-year property. The MACRS table values are .1429, .2449, .1749, .1249, .0893, .0892, .0893, and .0446 for Years 1 to 8, respectively. At the end of the project, the equipment will be sold for an estimated $295,000. The tax rate is 25 percent and the...

Alpha Industries is considering a project with an initial cost of $7.5 million. The project will...

Alpha Industries is considering a project with an initial cost of $7.5 million. The project will produce cash inflows of $1.55 million per year for 7 years. The project has the same risk as the firm. The firm has a pretax cost of debt of 5.46 percent and a cost of equity of 11.17 percent. The debt–equity ratio is .55 and the tax rate is 39 percent. What is the net present value of the project? $263,559 $482,364 $463,811 $397,552...

Alpha Industries is considering a project with an initial cost of $8.2 million. The project will...

Alpha Industries is considering a project with an initial cost of $8.2 million. The project will produce cash inflows of $1.93 million per year for 6 years. The project has the same risk as the firm. The firm has a pretax cost of debt of 5.67% and a cost of equity of 11.31%. The debt-equity ratio is 0.62 and the tax rate is 40%. What is the net present value of the project? Hint: You'll need to calculate the appropriate...

Your company is considering a project which will require the purchase of $725,000 in new equipment....

Your company is considering a project which will require the purchase of $725,000 in new equipment. The company expects to sell the equipment at the end of the project for 25% of its original cost, but some assets will remain in the CCA class. Annual sales from this project are estimated at $260,000. Initial net working capital equal to 32.50% of sales will be required. All of the net working capital will be recovered at the end of the project....

Subjects