5) The Blueberry Company is considering a project which will cost $424 initially. The project will...

5) The Blueberry Company is considering a project which will cost $424 initially. The project will not produce any cash flows for the first 3 years. Starting in year 4, the project will produce cash inflows of $454 a year for 5 years. This project is risky, so the firm has assigned it a discount rate of 15.4 percent. What is the net present value?

Expert Solution

	Computation of net present value
	i	ii	iii	iv=ii*iii
	year	Cash flow	PVIF @ 15.4%	present value
	0	-424	1.0000	(424.00)
	1	0	0.8666	-
	2	0	0.7509	-
	3	0	0.6507	-
	4	454	0.5639	256.00
	5	454	0.4886	221.83
	6	454	0.4234	192.23
	7	454	0.3669	166.58
	8	454	0.3179	144.35
				556.98

Therefore NPV =		556.98

jeff jeffy answered 1 year ago

Brewsters is considering a project with a life of 5 years and an initial cost of...

Brewsters is considering a project with a life of 5 years and an initial cost of $120,000. The discount rate for the project is 12%. The firm expects to sell 2,100 units a year at a net cash flow per unit of $20. The firm will have the option to abandon this project after 3 years at which time it could sell the project for $50,000. The firm is interested in knowing how the project will perform if the sales...

The company above is considering a 5 year project which would require an initial outlay of...

The company above is considering a 5 year project which would require an initial outlay of $800,000 for the manufacturing equipment (depreciated straight line to zero over 8 years). Salvage value in year 5 will be $200,000. In addition, the company will need $200,000 initial investment in working capital. Tax rate is 34%. The project will produce OCF of $350,000 for 5 years. NPV IRR PI Payback and Discounted Payback

A company is considering investing in a project with an initial cost of $250,000. The cost...

A company is considering investing in a project with an initial cost of $250,000. The cost of capital is 15%. The project will generate $100,000 every year for four years. Calculate the NPV & IRR & determine if they should invest in this project.

3，A company is considering a project which has an initial startup cost of $723,470. The firm...

3，A company is considering a project which has an initial startup cost of $723,470. The firm maintains a debt-to-equity ratio of 0.82. The flotation cost of debt is 6.02% and the flotation cost of external equity is 10.22%. The firm has sufficient internally generated equity to cover the equity cost of this project. What is the initial cost of the project including the flotation costs?

1.Projected Total Cash Flows Firm A is considering a project which will initially require $12,000 for...

1.Projected Total Cash Flows Firm A is considering a project which will initially require $12,000 for new equipment. The equipment will be depreciated straight line to a zero book value over the three year life of project In addition, the project will require an investment of $30,000 in net working capital which will be recovered at the end of the project Annual sales are $45,000 with cost of $32,400.The tax rate is 34% What is the net present value of...

A firm has estimated its cost of capital as 5% and is considering a project with...

A firm has estimated its cost of capital as 5% and is considering a project with an initial investment of -$265,000. The subsequent cash flows are $65,000; $77,000; $83,000; $91,000; and $96,000. In the final year (year #6), the firm must pay $50,000 to clean up the site. Calculate the project’s MIRR using the three methods discussed in class. Please provide timelines, a description of all of your math, and calculator inputs.

A firm is considering a project with a 5-year life and an initial cost of $1,000,000....

A firm is considering a project with a 5-year life and an initial cost of $1,000,000. The discount rate for the project is 10%. The firm expects to sell 2,500 units a year for the first 3 years. The after-tax cash flow per unit is $120. Beyond year 3, there is a 50% chance that sales will fall to 900 units a year for both years 4 and 5, and a 50% chance that sales will rise to 3,000 units...

You are considering investment in a project which will cost $50 million which will be depreciated...

You are considering investment in a project which will cost $50 million which will be depreciated to 0 over the next 3 years. The project will generate revenues of $13 million per year for the next 6 years with no expenses (other than depreciation). The company’s cost is capital is 8% and the corporate tax rate is 40%. After the 6 years, the project ends. What is the NPV of the project?

Fortune Company is considering a 3-year project with an initial cost of $594,000. The project will...

Fortune Company is considering a 3-year project with an initial cost of $594,000. The project will not directly produce any sales but will reduce operating costs by $153,000 a year. The equipment is classified as MACRS 7-year property. The MACRS table values are .1429, .2449, .1749, .1249, .0893, .0892, .0893, and .0446 for Years 1 to 8, respectively. At the end of the project, the equipment will be sold for an estimated $288,000. The tax rate is 25 percent and...

A company is considering investing in project X. The company has a cost of capital of...

A company is considering investing in project X. The company has a cost of capital of 10% p.a. Project X is a 9-year project with an initial cost of 400,000. The project will generate the following cash flows at the end of the years: Years Cash flows 1 90,000 2 80,000 3 50,000 4 50,000 5 50,000 6 50,000 7 50,000 8 50,000 9 15,000 a) Calculate the payback period (in years) for project X. Round your answer to 2 decimal...

Question