Down Under Boomerang, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment of $2,800,000. The fixed asset will be depreciated straight-line to zero over its three-year tax life, after which time it will be worthless. The project is estimated to generate $2,300,000 in annual sales, with costs of $1,075,000. The tax rate is 35 percent and the required return is 10 percent. What is the project’s NPV?
Answer to relevant QuestionsGold Star Industries is contemplating a purchase of computers. The firm has narrowed its choices to the SAL 5000 and the HAL 1000. Gold Star would need 9 SALs, and each SAL costs $3,700 and requires $500 of maintenance each ...Your company has been approached to bid on a contract to sell 24,000 voice recognition (VR) computer keyboards a year for four years. Due to technological improvements, beyond that time they will be outdated and no sales ...In the previous problem, suppose the fixed asset actually falls into the three-year MACRS class. All the other facts are the same. What is the project’s Year 1 net cash flow now? Year 2? Year 3? What is the new NPV? McGilla Golf (see Problem 14) would like to know the sensitivity of NPV to changes in the price of the new clubs and the quantity of new clubs sold. What is the sensitivity of the NPV to each of these variables? In ...In Problem 26, suppose you’re confident about your own projections, but you’re a little unsure about Detroit’s actual machine screw requirement. What is the sensitivity of the project OCF to changes in the quantity ...
Post your question