Question

In: Finance

Investment Amount 1.500.000 TL, information about an investment with an economic life of 5 years, unit...

Investment Amount 1.500.000 TL, information about an investment with an economic life of 5 years, unit sales price of the product to be produced when the investment is made (p) = 100 TL, unit variable cost (v) = 50 TL, amount of product planned to be sold (Q) = 20.000 the number, tax rate (T) = 0.20, the desired rate of return (k) = 0.18. The annual fixed expense that the business will bear from this project is 600.000 TL and 300.000 TL of these fixed expenses consist of non-monetary expenses (such as depreciation). THE NET PRESENT VALUE OF THE INVESTMENT BY USING THE SAME INVESTMENT INFORMATION AND THE ASSUMMENT THAT THE CASH FLOW WILL BE FIXED DURING ECONOMIC LIFE.

A) To the increase in unit sales price of 20 TL;

B) 30 TL unit variable expense increase;

C) 100,000 TL monetary fixed expense increase; D) 5% tax rate increase;

E) Sensitivity to 6% discount rate increase

while other conditions are constant (taking into account only the change in the relevant factor), determine which factor is more sensitive to the change in the relevant investment...

Solutions

Expert Solution


Related Solutions

An investment project’s lifetime is estimated as 6 years and requires 30 million TL as investment...
An investment project’s lifetime is estimated as 6 years and requires 30 million TL as investment cost. Salvage value of the project is estimated as 8 million TL (which will be received in the 7th year) However firm prefers to show salvage value only as 3 million TL. Firm uses 6-year straight line depreciation. It is estimated that the sales will be 14 million TL next year and then sales will grow by 15% each year. It is estimated that...
You are considering an investment project. The project has a life of three years. Project Information:...
You are considering an investment project. The project has a life of three years. Project Information: Initial investment into a new machine, which would cost Rs.4,50,000. Machine is to be depreciated to zero over three years (straight line depreciation) with no salvage value at the end. Operating revenue is expected to be Rs. 6,00,000 per year. Operating costs for raw materials expected to be Rs.3,00,000 per year. Assume tax rate is 30% and the discount rate is 20%. a. Compute...
An investment project requires an investment fund of Rp 200 billion with an economic life of...
An investment project requires an investment fund of Rp 200 billion with an economic life of 5 years with no residual value. The project's capital cost is 11%. Every year the project is predicted to provide net income of: Year Net Income 1 Rp 20 billions 2 Rp 22 billions 3 Rp 24 billions 4 Rp 26 billions 5 Rp 28 billions By using the Accounting Rate of Return, NPV and MIRR methods, does the investment need to be carried...
Assume Corbins ,Inc purchased an automated machine 5 years ago that had an estimated economic life...
Assume Corbins ,Inc purchased an automated machine 5 years ago that had an estimated economic life of 10 years. The Automated Machines originally cost $300,000 and has been fully depreciated, leaving a current book value of $0. The actual market value of this drill press is $80,000. The company is considering replacing the automated machine with a new one costing $380,000. Shipping and installation charges will add an additional $10,000 to the cost. Corbins., Inc also has paid a sunk...
Gallatin, Inc., is considering an investment of $376,000 in an asset with an economic life of...
Gallatin, Inc., is considering an investment of $376,000 in an asset with an economic life of 5 years. The firm estimates that the nominal annual cash revenues and expenses at the end of the first year will be $256,000 and $81,000, respectively. Both revenues and expenses will grow thereafter at the annual inflation rate of 2 percent. The company will use the straight-line method to depreciate its asset to zero over five years. The salvage value of the asset is...
LO, Inc., is considering an investment of $441,000 in an asset with an economic life of...
LO, Inc., is considering an investment of $441,000 in an asset with an economic life of five years. The firm estimates that the nominal annual cash revenues and expenses at the end of the first year will be $280,400 and $88,200, respectively. Both revenues and expenses will grow thereafter at the annual inflation rate of 3 percent. The company will use the straight-line method to depreciate its asset to zero over five years. The salvage value of the asset is...
LO, Inc., is considering an investment of $436,000 in an asset with an economic life of...
LO, Inc., is considering an investment of $436,000 in an asset with an economic life of five years. The firm estimates that the nominal annual cash revenues and expenses at the end of the first year will be $275,900 and $87,200, respectively. Both revenues and expenses will grow thereafter at the annual inflation rate of 2 percent. The company will use the straight-line method to depreciate its asset to zero over five years. The salvage value of the asset is...
LO, Inc., is considering an investment of $438,000 in an asset with an economic life of...
LO, Inc., is considering an investment of $438,000 in an asset with an economic life of five years. The firm estimates that the nominal annual cash revenues and expenses at the end of the first year will be $277,700 and $87,600, respectively. Both revenues and expenses will grow thereafter at the annual inflation rate of 4 percent. The company will use the straight-line method to depreciate its asset to zero over five years. The salvage value of the asset is...
Price, Inc., is considering an investment of $372,000 in an asset with an economic life of...
Price, Inc., is considering an investment of $372,000 in an asset with an economic life of 5 years. The firm estimates that the nominal annual cash revenues and expenses at the end of the first year will be $252,000 and $77,000, respectively. Both revenues and expenses will grow thereafter at the annual inflation rate of 5 percent. Price will use the straight-line method to depreciate its asset to zero over five years. The salvage value of the asset is estimated...
Etonic Inc. is considering an investment of $377,000 in an asset with an economic life of...
Etonic Inc. is considering an investment of $377,000 in an asset with an economic life of 5 years. The firm estimates that the nominal annual cash revenues and expenses at the end of the first year will be $257,000 and $82,000, respectively. Both revenues and expenses will grow thereafter at the annual inflation rate of 3 percent. The company will use the straight-line method to depreciate its asset to zero over five years. The salvage value of the asset is...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT