What is the NPV of this project? (in 000s) Bogle is considering a two-year project to...

What is the NPV of this project? (in 000s)

Bogle is considering a two-year project to manufacture microchips. Bogle purchases equipment for $750K. This two-year project will require additional inventory of $125K and accounts payable of $150K, which reverse at the end of the project. Bogle’s tax rate is 50%, and its cost of capital is 12%.

Bogle estimates incremental revenue of $600K in years 1 and 2, and operating expenses equal to 15% of revenues. The machine is depreciated straight-line (i.e., 50% in year 1 and 50% in year 2).

What is the NPV of this project? (in 000s)

Solutions

Expert Solution

Solution :-

Depreciation every year = $750,000 / 2 = $375,000

Working Capital Required = $125,000 - $150,000 = - $25,000

Therefore NPV of the Project ( in 000's ) = $2.918 K

If there is any doubt please ask in comments

Thank you please rate

jeff jeffy answered 1 year ago

Next > < Previous

Related Solutions

Calculating Project NPV; Considering a a new three year expansion project that requires an initial fixed...

Calculating Project NPV; Considering a a new three year expansion project that requires an initial fixed asset investment of $1.65million. The fixed asset will be depreciated straightline to zero over its three year tax life adfter which it will be worthless. The project is estimated to generate $1.24million in annual sales, with costs of $485,000. The tax rate is 35% and the required return is 12%. What is the NPV? Calculating project cashflow from assets; iN THE PREVIOUS PROBLEM SUPPOSE...

(NPV, PI, and IRR calculations) You are considering two independent projects, project A and project B....

(NPV, PI, and IRR calculations) You are considering two independent projects, project A and project B. The initial cash outlay associated with project A is $50,000 and the initial cash outlay associated with project B is $70,000 The required rate of return on both projects is 9 percent. The expected annual free cash inflows from each project are in the popup window: Calculate the NPV, PI, and IRR for each project and indicate if the project should be accepted. ...

(NPV, PI, and IRR calculations) You are considering two independent projects, project A and project B....

(NPV, PI, and IRR calculations) You are considering two independent projects, project A and project B. The initial cash outlay associated with project A is $50,000 and the initial cash outlay associated with project B is $70,000 The required rate of return on both projects is 12 percent. The expected annual free cash inflows from each project are in the popup window: .Calculate the NPV, PI, and IRR for each project and indicate if the project should be accepted. a....

You are considering two mutually exclusive projects. The NPV for project one is positive and higher...

You are considering two mutually exclusive projects. The NPV for project one is positive and higher than the NPV for project two, while the IRR for project two is higher than that for project one. Which project should the firm accept and why?

NPV Your division is considering two projects with the following cash flows (in millions): Project A...

NPV Your division is considering two projects with the following cash flows (in millions): Project A -$31 $7 $12 $22 Project B -$19 $13 $6 $5 What are the projects' NPVs assuming the WACC is 5%? Round your answer to two decimal places. Do not round your intermediate calculations. Enter your answer in millions. For example, an answer of $10,550,000 should be entered as 10.55. Negative value should be indicated by a minus sign. Project A $ million Project B...

Imperium Chemicals Limited (ICL) is considering a new production project (all figures in $000s). The machine...

Imperium Chemicals Limited (ICL) is considering a new production project (all figures in $000s). The machine involved has an installed purchase price of $180. The machine will be depreciated straight-line over its life of 3 years, at the end of which time it will have a salvage value of $40. Cash sales from this new project will be $200 per year and cash costs will run to $110 per year. The firm will need to invest $70 in inventory when...

Calculating Project NPV Down Under Boomerang, Inc., is considering a new three-year expansion project that requires...

Calculating Project NPV Down Under Boomerang, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment of $3,950,000. The fixed asset will be depreciated straight-line to zero over its three -year tax life, after which time it will be worthless. The project is estimated to generate $3,175,000 in annual sales, with costs of $1,455,000. The tax rate is 35 percent and the required return is 10 percent. What is the Project's NPV?

What is the NPV of this project if the required rate is 7%? Year CF 0 ...

What is the NPV of this project if the required rate is 7%? Year CF 0 -$1312 1 $743 2 $1757 3 $2148

A two-year project has been evaluated and has an NPV on an after tax basis of...

A two-year project has been evaluated and has an NPV on an after tax basis of -$2000. On reviewing the analysis the Finance Manager found that depreciation had been omitted from the tax analysis. The allowable depreciation for tax purposes is $5000 for each year. Using a tax rate of 30% and and a discount rate after tax of 12% pa, determine the correct NPV for the project (to the nearest dollar). Can someone help me to solve this and...

CF and NPV for a project: Midland Ltd is considering buying a new farm that it...

CF and NPV for a project: Midland Ltd is considering buying a new farm that it plans to operate for 10 years. The farm will require an initial investment of $12,000,000. The investment will consist of $2,000,000 for land and $10,000,000 for trucks and other equipment. The land, all trucks, and all other equipment are expected to be sold at the end of 10 years at a price of $5 million, $2 million above book value. The farm is expected...

Subjects