Question
In: Finance
Indigo River Packaging is considering a project that would last for 2 years and have a...
Indigo River Packaging is considering a project that would last for 2 years and have a cost of capital of 17.88 percent. The relevant level of net working capital for the project is expected to be 24,000 dollars immediately (at year 0); 26,000 dollars in 1 year; and 0 dollars in 2 years. Relevant expected revenue, costs, depreciation, and cash flows from capital spending in years 0, 1, and 2 are presented in the following table (in dollars). The tax rate is 50 percent. What is the net present value of this project?
|
Year 0 |
Year 1 |
Year 2 |
|
|
Revenue |
$0 |
167,000 |
167,000 |
|
Costs |
$0 |
64,000 |
64,000 |
|
Depreciation |
$0 |
40,000 |
40,000 |
|
Cash flows from capital spending |
-84,000 |
0 |
19,000 |
Solutions
Expert Solution
Compute the net present value, using MS-excel as shown below:
The result of the above excel table is as follows:
Hence, the net present value is $31,709.03102
jeff jeffy answered 1 year agoRelated Solutions
ndigo River Entertainment is considering a project that would last for 2 years. The project would...
ndigo River Entertainment is considering a project that would
last for 2 years. The project would involve an initial investment
of 79,000 dollars for new equipment that would be sold for an
expected price of 65,000 dollars at the end of the project in 2
years. The equipment would be depreciated to 23,000 dollars over 4
years using straight-line depreciation. In years 1 and 2, relevant
annual revenue for the project is expected to be 77,000 dollars per
year and...
White Mountain Packaging is considering a project that would last for 2 years. The project would...
White Mountain Packaging is considering a project that would
last for 2 years. The project would involve an initial investment
of 195,000 dollars for new equipment that would be sold for an
expected price of 168,000 dollars at the end of the project in 2
years. The equipment would be depreciated to 27,000 dollars over 7
years using straight-line depreciation. In years 1 and 2, relevant
annual revenue for the project is expected to be 170,000 dollars
per year and...
2. Several companies, including Indigo River Packaging and White Mountain Banking, are considering project A, which...
2. Several companies, including Indigo River Packaging and White
Mountain Banking, are considering project A, which is believed by
all to have a level of risk that is equal to that of the
average-risk project at Indigo River Packaging. Project A is a
project that would require an initial investment of 6,149 dollars
and then produce an expected cash flow of 10,964 dollars in 8
years. Project A has an internal rate of return of 7.5 percent. The
weighted-average cost...
White Mountain Consulting is considering a project that would last for 2 years and have a...
White Mountain Consulting is considering a project that would
last for 2 years and have a cost of capital of 17.72 percent. The
relevant level of net working capital for the project is expected
to be 21,000 dollars immediately (at year 0); 32,000 dollars in 1
year; and 0 dollars in 2 years. Relevant expected revenue, costs,
depreciation, and cash flows from capital spending in years 0, 1,
and 2 are presented in the following table (in dollars). The tax...
Silver Sun Aviation is considering a project that would last for 2 years and have a...
Silver Sun Aviation is considering a project that would last for
2 years and have a cost of capital of 17.06 percent. The relevant
level of net working capital for the project is expected to be
16,000 dollars immediately (at year 0); 12,000 dollars in 1 year;
and 0 dollars in 2 years. Relevant expected revenue, costs,
depreciation, and cash flows from capital spending in years 0, 1,
and 2 are presented in the following table (in dollars). The tax...
Red Royal Recycling is considering a project that would last for 2 years. The project would...
Red Royal Recycling is considering a project that would last for
2 years. The project would involve an initial investment of 104,000
dollars for new equipment that would be sold for an expected price
of 104,000 dollars at the end of the project in 2 years. The
equipment would be depreciated to 27,000 dollars over 7 years using
straight-line depreciation. In years 1 and 2, relevant annual
revenue for the project is expected to be 91,000 dollars per year
and...
Red Royal Recycling is considering a project that would last for 2 years. The project would...
Red Royal Recycling is considering a project that would last for
2 years. The project would involve an initial investment of 104,000
dollars for new equipment that would be sold for an expected price
of 104,000 dollars at the end of the project in 2 years. The
equipment would be depreciated to 27,000 dollars over 7 years using
straight-line depreciation. In years 1 and 2, relevant annual
revenue for the project is expected to be 91,000 dollars per year
and...
White Mountain Industrial is considering a project that would last for 2 years. The project would...
White Mountain Industrial is considering a project that would
last for 2 years. The project would involve an initial investment
of 107,000 dollars for new equipment that would be sold for an
expected price of 78,000 dollars at the end of the project in 2
years. The equipment would be depreciated to 19,000 dollars over 4
years using straight-line depreciation. In years 1 and 2, relevant
annual revenue for the project is expected to be 104,000 dollars
per year and...
Yellow Sand Consulting is considering a project that would last for 2 years. The project would...
Yellow Sand Consulting is considering a project that would last
for 2 years. The project would involve an initial investment of
93,000 dollars for new equipment that would be sold for an expected
price of 78,000 dollars at the end of the project in 2 years. The
equipment would be depreciated to 23,000 dollars over 7 years using
straight-line depreciation. In years 1 and 2, relevant annual
revenue for the project is expected to be 90,000 dollars per year
and...
Blue Eagle Technology is considering a project that would last for 2 years. The project would...
Blue Eagle Technology is considering a project that would last
for 2 years. The project would involve an initial investment of
149,000 dollars for new equipment that would be sold for an
expected price of 134,000 dollars at the end of the project in 2
years. The equipment would be depreciated to 21,000 dollars over 8
years using straight-line depreciation. In years 1 and 2, relevant
annual revenue for the project is expected to be 136,000 dollars
per year and...
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- Discuss the difference between a)FAT, FAT32, NTFS, CDFS, etc., b)What make them diferent and why they...
- 2. Given the Instruction sets for Machine-1, Machine-2 and Machine-3, write programs to calculate: P= ((B×C)...
- Problem III. Suppose that, in a market of a certain good, there are firms that are...
- discusses the difference between public relations and advertising. Cite an organization or individual and give one...
- Draw a sketch for the Hydrogen (discrete) spectrum, labeling the lines according to their respective quantum...
- Create a program/function using PYTHON that takes cents and returns to the customer how MANY coins...
- You have been asked to design an elevator system. The functions of an elevator includes moving...
ADVERTISEMENT