2.) Needle and Thread Inc. is considering expanding one of its production facilities to build a...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
2.) Needle and Thread Inc. is considering expanding one of its production facilities to build a new line of sewing kits. The project would require a $9,000,000 capital investment and will be equally depreciated (straight-line) over its 3 year life. They believe they can salvage $1,200,000 for the equipment at the end of the project. Incremental sales are expected to be $10,000,000 annually for the 3 year period with cash operating expenses of 42% of sales. The company would also have to commit initial working capital to the project of $1,000,000. The company is subject to a marginal tax rate of 36% and investors require a 10% return on projects with a similar risk. Determine the project's NPV. Should the company pursue this investment opportunity? (10 points) 2.) Needle and Thread Inc. is considering expanding one of its production facilities to build a new line of sewing kits. The project would require a $9,000,000 capital investment and will be equally depreciated (straight-line) over its 3 year life. They believe they can salvage $1,200,000 for the equipment at the end of the project. Incremental sales are expected to be $10,000,000 annually for the 3 year period with cash operating expenses of 42% of sales. The company would also have to commit initial working capital to the project of $1,000,000. The company is subject to a marginal tax rate of 36% and investors require a 10% return on projects with a similar risk. Determine the project's NPV. Should the company pursue this investment opportunity? (10 points)
Expert Answer:
Related Book For
Project Management in Practice
ISBN: 978-0470533017
4th edition
Authors: Samuel J. Mantel Jr., Jack R. Meredith, Sco
Posted Date:
Students also viewed these finance questions
-
The city of Animal town plans to build a new bridge across the river separating the two halves of the city for use by its residents. It is considering two plans for financing this bridge. Plan A...
-
A start-up company is planning to build a new golf course. For marketing purposes, the company would like to be able to advertise the new course as one of the more difficult courses in the state of...
-
A town wants to build a new bridge. Construction firms will submit sealed bids. The town will award the contract to the firm that submits the lowest bid and will pay the firm the amount of the second...
-
Process compliance can be affected by: Multiple select question. organizational structure. maverick purchasing. organizational culture. information systems
-
a. Computer stocks currently provide an expected rate of return of 16%. MBI, a large computer company, will pay a year-end dividend of $2 per share. If the stock is selling at $50 per share, what...
-
Determine the moments at B and C. EI is constant. Assume B and C are rollers and A and D are pinned. 3 k/ft DA -8 ft -20 ft- -8 ft-
-
A statistics teacher claims that, on the average, 20% of her students get a grade of A, 35% get a B, 25% get a C, 10% get a D, and 10% get an F. The grades of a random sample of 100 students were...
-
Assume a condition in which the economy is strong, with relatively high employment. For one reason or another, the money supply is increasing at a high rate and there is little evidence of money...
-
A +2.50 C point charge is at the center of a thin spherical shell of radius 0.100 m that has a uniform surface charge density. The electric field 0.200 m from the point charge has magnitude 2.93 105...
-
Bob and carol was divorced and Bob no longer wanted to keep the $100,000 life insurance policy he had previously purchased. He sold the policy to his friend Bill for $10,000 and Bill named himself...
-
A $1,000 par value bond that pays interest annually just paid $74 in interest. What is the coupon rate? Q2) A 05.00% coupon, 22-year annual bond is priced at $925. What is the current yield for this...
-
A Singapore dollar (SGD) is worth 0.5697 Swiss francs (CHF). A Swiss franc sells for 3.6665 British pounds. Find the exchange rate between the Singapore dollar and the British pound.
-
What is considered a strong medium-risk ROR in today's market? Discuss.
-
Find the price for the bond. Par Value: 5,000 Coupon Rate: 8% Years to Maturity: 15 Yield to Maturity: 11% Price: ?
-
Your Task: after reading the seven (7) Catholic Social Teachings, you will be required to watch the documentary "Nike: Behind the Swoosh" and answer the questions that follow. Documentary Link :...
-
Westlake is located 34.2 N latitude. What is the centripetal acceleration experienced at this location? (Hint: we circle on the Earth once every 24 hours and we are not on the equator).
-
Exercise 4-(2 Marks) Solve the following computational thinking problems using data collection. Problem Predict customer behavior Measure student performance Data
-
Chao, Louis, and Mari, unrelated individuals, own all of the shares of Cerise Corporation. All three shareholders have been active in the management of Cerise since its inception. In the current...
-
1. Develop a mind map for this project. 2. Convert your mind map into a WBS. 3. Discuss how your mind map might be used to facilitate other project planning activities such as resource allocation,...
-
In the project described in Problem 18, assume that the net cash inflows are probabilistic variables. Further assume that each forecast net cash inflow is normally distributed with standard...
-
What information does Alison need to determine the probable impact of Kelseys proposed project on the other projects in the department? Should her findings affect her decision about Kelseys project?...
-
What is online processing?
-
What function is performed by an edit program?
-
What is the difference between a minicomputer and a microcomputer?
Study smarter with the SolutionInn App