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A three-year project will cost $150,000 to construct. This will be depreciated straight line to zero...
A three-year project will cost $150,000 to construct. This will be depreciated straight line to zero over the three-year life. The project is expected to generate sales of $450,000 per year. It has annual variables costs of $200,000 and annual fixed costs of $100,000 per year. The appropriate tax rate is 25 percent and the required rate of return on the project is 16 percent. Assume that a salvage company will pay $60,000 (before taxes) for the assets at the end of year 3. The project also has an initial net working capital requirement of $40,000, which is fully recoverable when the project ends. Note that the project only depreciates the $150,000 initial cost. The salvage value is excluded from depreciation. What is the project’s net present value (NPV)
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jeff jeffy answered 1 year agoRelated Solutions
A three-year project will cost $150,000 to construct. This will be depreciated straight line to zero...
A three-year project will cost $150,000 to construct. This will
be depreciated straight line to zero over the three-year life. The
project is expected to generate sales of $450,000 per year. It has
annual variables costs of $200,000 and annual fixed costs of
$100,000 per year. The appropriate tax rate is 25 percent and the
required rate of return on the project is 16 percent. Assume that a
salvage company will pay $60,000 (before taxes) for the assets at
the...
A three-year project will cost $150,000 to construct. This will be depreciated straight line to zero...
A three-year project will cost $150,000 to construct. This will
be depreciated straight line to zero over the three-year life. The
project is expected to generate sales of $450,000 per year. It has
annual variables costs of $200,000 and annual fixed costs of
$100,000 per year. The appropriate tax rate is 25 percent and the
required rate of return on the project is 16 percent. Assume that a
salvage company will pay $60,000 (before taxes) for the assets at
the...
A three-year project will cost $150,000 to construct. This will be depreciated straight-line to zero over...
A three-year project will cost $150,000 to construct. This will
be depreciated straight-line to zero over the three-year life. The
project is expected to generate sales of $450,000 per year. It has
annual variables costs of $200,000 and annual fixed costs of
$100,000 per year. The appropriate tax rate is 25 percent and the
required rate of return on the project is 16 percent. Assume that a
salvage company will pay $60,000 (before taxes) for the assets at
the end...
A project requires an initial investment of $1,000,000 and is depreciated straight-line to zero salvage over...
A project requires an initial investment of $1,000,000 and is
depreciated straight-line to zero salvage over its 10-year
life.
The project produces items that sell for $1,000 each, with
variable costs of $700 per unit. Fixed costs are $350,000 per
year.
What is the accounting break-even quantity? o Q = (FC + D)/(P
– v)
What is the operating cash flow at accounting break-even? o
OCF= [PQ - vQ – FC – D] + D
What is...
A project requires an initial investment of $1,000,000 and is depreciated straight-line to zero salvage over...
A project requires an initial investment of $1,000,000 and is
depreciated straight-line to zero salvage over its 10-year life.
The project produces items that sell for $1,000 each, with variable
costs of $700 per unit. Fixed costs are $350,000 per year. What is
the accounting break-even quantity and financial break-even
quantity (assume 10% as discount rate)? I'm not too sure how to go
about this question. Any help?
A project requires an initial investment of $1,000,000 and is depreciated straight-line to zero salvage over...
A project requires an initial investment of $1,000,000 and is
depreciated straight-line to zero salvage over its 10-year life.
The project produces items that sell for $1,000 each, with variable
costs of $700 per unit. Fixed costs are $350,000 per year. What is
the financial break-even quantity assuming 10% as discount
rate?
A project requires an initial investment of $1,000,000 and is depreciated straight-line to zero salvage over...
A project requires
an initial investment of $1,000,000 and is depreciated
straight-line to zero salvage over its 10-year life. The project
produces items that sell for $1,000 each, with variable costs of
$700 per unit. Fixed costs are $350,000 per year.
1)
What is the
accounting
break-even quantity? What is theoperating
cash flow at
accounting break-even? What is degree of operating leverage
(DOL) at that output
level?And
what does the DOL indicate?
2)
What is the cash
flow break-even quantity?...
Arvin's is analyzing a project with an initial cost of $212,000 that would be depreciated straight-line...
Arvin's is analyzing a project with an initial cost of $212,000
that would be depreciated straight-line to zero over the project’s
3-year life. Estimates include fixed costs of $48,280, variable
costs per unit of $13.12, and a selling price of $26.50 per unit.
The discount rate is set at 16 percent with a tax rate of 35
percent. What is the financial breakeven point?
Multiple Choice
11,618 units
13,067 units
10,749 units
11,199 units
10,117 units
The new equipment will cost $400,000. It would be depreciated to zero using straight-line depreciation over...
The new equipment will cost $400,000. It would be depreciated to
zero using straight-line depreciation over a 5-year period. The
estimated salvage value is $100,000 at the end of the project. The
initial requirement in net working capital is $55,000, all of which
will be recouped at the end of the project. The projected operating
cash flows are $155,500 per year. The tax rate is 30%. What is the
internal rate of return on this 5-year project? Group of answer...
An asset that costs $5,000 will be depreciated straight-line to zero over its five- year tax...
An asset that costs $5,000 will be depreciated
straight-line to zero over its five-
year tax life. The asset is to
be used in a three-year project. At the end of the
third year, the asset will be
sold for $1,200. If the relevant tax rate is 34%, what
is
the salvage value of this
asset?
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