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In: Finance
What is the NPV of project A? The project would require an initial investment in equipment...
What is the NPV of project A? The project would require an initial investment in equipment of 60,000 dollars and would last for either 3 years or 4 years (the date when the project ends will not be known until it happens and that will be when the equipment stops working in either 3 years from today or 4 years from today). Annual operating cash flows of 18,600 dollars per year are expected each year until the project ends in either 3 years or 4 years. In 1 year, the project is expected to have an after-tax terminal value of 40,627 dollars. The cost of capital for this project is 9.42 percent.
Solutions
jeff jeffy answered 1 year agoRelated Solutions
Fairfax Pizza is evaluating a project that would require an initial investment in equipment of 200,000...
Fairfax Pizza is evaluating a project that would require an
initial investment in equipment of 200,000 dollars and that is
expected to last for 6 years. MACRS depreciation would be used
where the depreciation rates in years 1, 2, 3, and 4 are 40
percent, 33 percent, 19 percent, and 8 percent, respectively. For
each year of the project, Fairfax Pizza expects relevant,
incremental annual revenue associated with the project to be
346,000 dollars and relevant, incremental annual costs associated...
1) Fairfax Pizza is evaluating a project that would require an initial investment in equipment of...
1) Fairfax Pizza is evaluating a project that would require an
initial investment in equipment of 300,000 dollars and that is
expected to last for 6 years. MACRS depreciation would be used
where the depreciation rates in years 1, 2, 3, and 4 are 40
percent, 34 percent, 18 percent, and 8 percent, respectively. For
each year of the project, Fairfax Pizza expects relevant,
incremental annual revenue associated with the project to be
567,000 dollars and relevant, incremental annual costs...
Project B: This project requires an initial investment of $20,000,000 in equipment which will require additional...
Project B: This project requires an initial investment of
$20,000,000 in equipment which will require additional expense of
$1,000,000 to install in the current facility. Consistent with
other projects, the equipment will be depreciated using the MACRS
Investment Class schedule. Once installed, the firm will need to
increase inventory by $6,000,000. The project will last 6 years,
but at the end of that period, the equipment will have no salvage
value. During the operational period of this project, the product...
Cooper Industries is considering a project that would require an initial investment of $101,000. The project...
Cooper Industries is considering a project that would require an
initial investment of $101,000. The project would result in cost
savings of $62,000 in year 1 and $70,000 in year two. What is the
internal rate of return?
What is the NPV for a project with the following characteristics? Initial investment is $1,700,000 Initial...
What is the NPV for a project with the following
characteristics? Initial investment is $1,700,000 Initial
investment is depreciated to $0 over its 10 year life Project
generates incremental after-tax cash flows (OCF) of $325,000 per
year over the projects life Project requires a net working capital
(NWC) investment today of $40,000, which is recovered at the end of
the project Assets purchased with the initial investment are
expected to have a salvage value of $62,000 at the end of...
You've identified a project that would require an initial investment this year of $1500, and would...
You've identified a project that would require an initial
investment this year of $1500, and would generate cash flows of
either $2400 or $1200 depending on the economy, with either being
equally likely. We're going to use our 'perfect world' approach and
assume no taxes and no transaction costs. You demand an 8% market
risk premium and the risk-free rate is 4%. What is the value of
this project today and the expected return to equity holders?
(company has no...
What is the NPV of a project that has an initial investment of $7,300, with end...
What is the NPV of a project that has an initial investment of
$7,300, with end of year cash flows as follows: year 1: $1,500 year
2: $2,500 year 3: $3,000 year 4: $2,500 year 5: $1,500 The interest
rate is 8%
Cardinal Company is considering a project that would require a $2,985,000 investment in equipment with a...
Cardinal Company is considering a project that would require a
$2,985,000 investment in equipment with a useful life of five
years. At the end of five years, the project would terminate and
the equipment would be sold for its salvage value of $400,000. The
company’s discount rate is 16%. The project would provide net
operating income each year as follows:
Sales
$
2,737,000
Variable expenses
1,001,000
Contribution margin
1,736,000
Fixed expenses:
Advertising, salaries, and other
fixed...
Cardinal Company is considering a project that would require a $2,985,000 investment in equipment with a...
Cardinal Company is considering a project that would require a
$2,985,000 investment in equipment with a useful life of five
years. At the end of five years, the project would terminate and
the equipment would be sold for its salvage value of $400,000. The
company’s discount rate is 16%. The project would provide net
operating income each year as follows:
Sales
$
2,737,000
Variable expenses
1,001,000
Contribution margin
1,736,000
Fixed expenses:
Advertising, salaries, and other
fixed...
Cardinal Company is considering a project that would require a $2,810,000 investment in equipment with a...
Cardinal Company is considering a project that would require a
$2,810,000 investment in equipment with a useful life of five
years. At the end of five years, the project would terminate and
the equipment would be sold for its salvage value of $500,000. The
company’s discount rate is 16%. The project would provide net
operating income each year as follows:
Sales
$
2,847,000
Variable expenses
1,121,000
Contribution margin
1,726,000
Fixed expenses:
Advertising, salaries, and other
fixed...
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