Question
In: Finance
King Fisher Aviation is considering an investment in a new technology for a drone project with...
King Fisher Aviation is considering an investment in a new technology for a drone project with a price of $16 million. Their current technology has a book value of $5 million and a market value of $5 million. The new technology is expected to have a five (5) year life, and the old technology has three (3) years left in which it can be expected to be used. If the firm replaces the old technology with the new technology it expects to save $5.7 million in operating costs each year over the next four years. If the firm purchases the new technology, it will also need an investment of $300,000 in net working capital. The required return on the investment is 12 percent, and the tax rate is 39 percent.
What are the NPV and IRR of the decision to replace the old technology?
show work please
Solutions
jeff jeffy answered 1 year agoRelated Solutions
King Fisher Aviation is considering an investment in a new technology for a drone project with...
King Fisher Aviation is considering an investment in a new
technology for a drone project with a price of $16 million. Their
current technology has a book value of $5 million and a market
value of $5 million. The new technology is expected to have a five
(5) year life, and the old technology has three (3) years left in
which it can be expected to be used. If the firm replaces the old
technology with the new technology it...
King Fisher Aviation is considering an investment in a new technology for a drone project with...
King Fisher Aviation is considering an investment in a new
technology for a drone project with a price of $16 million. Their
current technology has a book value of $5 million and a market
value of $5 million. The new technology is expected to have a five
(5) year life, and the old technology has three (3) years left in
which it can be expected to be used. If the firm replaces the old
technology with the new technology it...
King Fisher Aviation is considering an investment in a new technology for a drone project with...
King Fisher Aviation is considering an investment in a new
technology for a drone project with a price of $16 million. Their
current technology has a book value of $5 million and a market
value of $5 million. The new technology is expected to have a five
(5) year life, and the old technology has three (3) years left in
which it can be expected to be used. If the firm replaces the old
technology with the new technology it...
King Fisher Aviation is considering an investment in a new technology for a drone project with...
King Fisher Aviation
is considering an investment in a new technology for a drone
project with a price of $16 million. Their current technology has a
book value of $5 million and a market value of $5 million. The new
technology is expected to have a five (5) year life, and the old
technology has three (3) years left in which it can be expected to
be used. If the firm replaces the old technology with the new
technology it...
King Fisher Aviation is considering an investment in a new technology for a drone project with...
King Fisher Aviation is considering an investment in a new
technology for a drone project with a price of $16 million. Their
current technology has a book value of $5 million and a market
value of $5 million. The new technology is expected to have a five
(5) year life, and the old technology has three (3) years left in
which it can be expected to be used. If the firm replaces the old
technology with the new technology it...
King Fisher Aviation is evaluating an investment project with the following case flows: $6,000 $5,500 $7,000...
King Fisher Aviation is evaluating an investment project with
the following case flows:
$6,000
$5,500
$7,000
$8,000
Discount rate 14 percent
What are your recommendations on the investment project? Explain
your reasoning.
King Fisher Aviation is evaluating an investment project with the following case flows: year 1 $6,000:...
King Fisher Aviation is evaluating an investment project with
the following case flows:
year 1 $6,000:
year 2 $5,500:
year3 $7,000:
year 4 $8,000
Discount rate 14 percent What is the discounted payback period
for these cash flows if the initial cost is 15,000? What if the
initial cost is $12,000? What if the cost is $16,000?
I need all 4 years with the discount rate at 14% and with the
different initial costs.
Annual cash
inflows:
Year 1
$ ...
Following are the most recent balance sheets for King Fisher Aviation. Excluding accumulated depreciation, determine whether...
Following are the most recent balance sheets for King Fisher
Aviation.
Excluding accumulated depreciation, determine whether each item
is a use of cash, and the amount:
Assets
2015
2016
Cash
49,280
44,816
Accounts Receivable
98,155
101,412
Inventories
82,400
87,715
Property, Plant, and Equipment
223,994
242,085
Less: Accumulated
depreciation
76,174
85,688
Total Assets
377,655
390,340
Liabilities and Equity
2015
2016
Accounts Payable
74,511
49,496
Accrued Expenses
10,790
7,740
Long-term debt
48,000
44,000
Common stock
25,000
30,000
Accumulated Retained Earnings
219,354...
King Fisher Aviation has projected the following quarterly sales amounts for the coming year: Quarter 1...
King Fisher Aviation
has projected the following quarterly sales amounts for the coming
year:
Quarter 1 $750
Quarter 2 $820
Quarter 3 $790
Quarter 4 $950
Accounts Receivable at
the beginning of the year are $350. King Fisher has a 30 day
collection period. Calculate the cash collections in each of the
four quarters by completing the following for each quarter.
Beginning
receivables
Sales
Cash Collections
Ending Receivables
Rework the Ending
Receivables calculation using 45 and 60 days.
This is...
King Fisher Aviation has projected the following quarterly sales amounts for the coming year: Quarter 1...
King Fisher Aviation
has projected the following quarterly sales amounts for the coming
year:
Quarter 1 $750
Quarter 2 $820
Quarter 3 $790
Quarter 4 $950
Accounts Receivable at
the beginning of the year are $350. King Fisher has a 30 day
collection period. Calculate the cash collections in each of the
four quarters by completing the following for each quarter.
Beginning
receivables
Sales
Cash Collections
Ending Receivables
Rework the Ending
Receivables calculation using 45 and 60 days.
Fill in...
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