Dog Up! Franks is looking at a new sausage system with an installed cost of $540,000. This
Question:
Dog Up! Franks is looking at a new sausage system with an installed cost of $540,000. This cost will be depreciated straight-line to zero over the project's five-year life, at the end of which the sausage system can be scrapped for $80,000. The sausage system will save the firm $170,000 per year in pretax operating costs, and the system requires an initial investment in net working capital of $29,000. If the tax rate is 34 percent and the discount rate is 10 percent, what is the NPV of this project?
Depending upon the context, the discount rate has two different definitions and usages. First, the discount rate refers to the interest rate charged to the commercial banks and other financial institutions for the loans they take from the Federal...
Step by Step Answer:
Input area Installation cost 540000 Pretax salvage value ...View the full answer
Fundamentals of Corporate Finance
ISBN: 978-0077861704
11th edition
Authors: Stephen Ross, Randolph Westerfield, Bradford Jordan
Related Video
NPV stands for \"Net Present Value,\" which is a financial concept used to determine the value of an investment or project. It measures the difference between the present value of cash inflows and the present value of cash outflows over a given period of time, using a specific discount rate. To calculate the NPV of an investment, you need to first estimate the cash inflows and outflows associated with the investment, and then discount them back to their present values using a discount rate. The discount rate represents the cost of capital or the expected rate of return required by investors. The formula for calculating NPV is: NPV = sum of (cash inflows / (1 + discount rate)^t) - sum of (cash outflows / (1 + discount rate)^t) Where: Cash inflows: the expected cash received from the investment Cash outflows: the expected cash paid out for the investment Discount rate: the required rate of return or the cost of capital t: the time period in which the cash flow occurs If the NPV is positive, it means that the investment is expected to generate a return higher than the required rate of return or the cost of capital, and it may be considered a good investment. If the NPV is negative, it means that the investment is not expected to generate a return higher than the required rate of return or the cost of capital, and it may be considered a bad investment.
Students also viewed these Corporate Finance questions
-
Franks is looking at a new sausage system with an installed cost of $540,000. This cost will be depreciated straight-line to zero over the project's five-year life, at the end of which the sausage...
-
Kolbys Korndogs is looking at a new sausage system with an installed cost of $560,000. This cost will be depreciated straight-line to zero over the projects five-year life, at the end of which the...
-
Symon Meats is looking at a new sausage system with an installed cost of $290,000. This cost will be depreciated straight-line to zero over the projects five-year life, at the end of which the...
-
We have titrated natural water in which the primary buffering agent is carbonate species and understood how to predict the titration curve using the equilibrium constants of those weak acids. Plot...
-
Presented below are a series of unrelated situations. 1. Spock Company's unadjusted trial balance at December 31, 2008, included the following accounts. Spock Company estimates its bad debt expense...
-
Richard Ellis, the director of cost operations of American Micro Devices, wishes to develop an accurate cost function to explain and predict support costs in the companys printed circuit board...
-
The company is committed to ethical conduct and has no tolerance for fraud and unethical behavior. There are some concerns about abuses in your department. Do you know anything about the concerns I...
-
Heartland Companys budgeted sales and budgeted cost of goods sold for the coming year are $144,000,000 and $99,000,000 respectively. Short-term interest rates are expected to average 10%. If...
-
IQ scores (as measured by the Stanford-Binet intelligence test) are normally distributed with a mean of 100 and a standard deviation of 16. What percentage of the population has an IQ score between...
-
Anthony Zelinski operates Anthony's Cricket Farm in Atlanta, Georgia. Anthony's raises about 18 million crickets a month. Most are sold to pet stores at $9.23 for a box of 1,000 crickets. Pet stores...
-
Parker & Stone, Inc., is looking at setting up a new manufacturing plant in South Park to produce garden tools. The company bought some land six years ago for $3.5 million in anticipation of using it...
-
Your firm is contemplating the purchase of a new $425,000 computer-based order entry system. The system will be depreciated straight-line to zero over its five-year life. It will be worth $30,000 at...
-
What is the major distinction between income and expenses under IFRS?
-
A well-known convenience store chain aims to "offer its customers the goods they want, wherever and whenever they want them." Under this premise, the company began to develop structures that would...
-
What can financial institutes (banks) Network administrators do to protect networks from intrusions ?
-
wwwwwwww Explain how the binding of one equivalent of CTP to Aspartate transcarbamoylase enhances the affinity for a second, and a third.
-
Of 250 administrative and 350 staff employees at Money Bank, 100 of the administrators and 280 of the staff are on flex time. If an employee is selected at random from this group, what is the...
-
1. For each of the two scenarios below, please answer the following questions: (50 points, 25 points for scenario; see details for each question). a) The founders' equity holdings (i.e., percentage...
-
Classify the following variables into the correct level of data (nominal, ordinal, interval, or ratio): a. Number of Facebook friends b. Height, measured in centimeters c. Reaction time d. Kelvin...
-
1. True or False. Pitfalls to consider in a statistical test include nonrandom samples, small sample size, and lack of causal links. 2. Because 25 percent of the students in my morning statistics...
-
What happens to the future value of a perpetuity if interest rates increase? What if interest rates decrease?
-
In the chapter, we gave several examples of so-called payday loans. As you saw, the interest rates on these loans can be extremely high and are even called predatory by some. Do you think such high...
-
Wainright Co. has identified an investment project with the following cash flows. If the discount rate is 10 percent, what is the present value of these cash flows? What is the present value at 18...
-
Three charged particles are at the corners of an equilateral triangle as shown in the figure below. (Let q = 4.00 C, and L = 0.800 m.) 7.00 60.0 L -4.00 C (a) Calculate the electric field at the...
-
im's & Elaine's goals is to retire by the time Jim turns 65 years old. They want to ensure that they have $80,000 a year for their retirement. Also, they would like to have sufficient funds to...
-
The issue of fraud must be considered when managing risk as it could present a major liability to the organization. Fraud is an act that requires an aggressive response and correction by an...
Study smarter with the SolutionInn App