Question: Problem 9-14 Project Evaluation (LO2) Revenues generated by a new fad product are forecast as follows: Year Revenues 1 $52,000 2 30,000 3 20,000 4

Problem 9-14 Project Evaluation (LO2)

Revenues generated by a new fad product are forecast as follows:

Year	Revenues
1	$52,000
2	30,000
3	20,000
4	10,000
Thereafter	0

Expenses are expected to be 50% of revenues, and working capital required in each year is expected to be 30% of revenues in the following year. The product requires an immediate investment of $54,000 in plant and equipment.

a. What is the initial investment in the product? Remember working capital.

b. If the plant and equipment are depreciated over 4 years to a salvage value of zero using straight-line depreciation, and the firms tax rate is 30%, what are the project cash flows in each year? Assume the plant and equipment are worthless at the end of 4 years. (Do not round intermediate calculations.)

c. If the opportunity cost of capital is 12%, what is the project's NPV? (A negative value should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 2 decimal places.)

d. What is project IRR? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

Detailed Solutions please!

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock blur-text-image

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!

Return to questi Problem 9-14 Project Evaluation (LO2) Revenues generated by a new fad product are forecast as follows: Year Revenues 540, eee 20,000 15,000 10,000 Thereafter Expenses are expected to...

Problem 9-14 Project Evaluation (LO2) Revenues generated by a new fad product are forecast as follows: Year Revenues 1 $60,000 2 40,000 3 30,000 4 10,000 Thereafter 0 Expenses are expected to be 30%...

Problem 9-14 Project Evaluation (LO2) Revenues generated by a new fad product are forecast as follows: Year Revenues 1 $52,800 2 30,000 3 20,000 4 10,000 Thereafter Expenses are expected to be 50% of...

Problem 9-14 Project Evaluation (LO2) Revenues generated by a new fad product are forecast as follows: Year Revenues 1 $56,000 2 40,000 3 30,000 4 20,000 Thereafter 0 Expenses are expected to be 50%...

Problem 9-14 Project Evaluation (LO2) Revenues generated by a new fad product are forecast as follows: Year 1 2 Revenues $46,000 30,000 20,000 10,000 4 Thereafter Expenses are expected to be 50% of...

10 Problem 9-14 Project Evaluation (LO2) Revenues generated by a new fad product are forecast as follows: 10 points Year 1 2. 3 4 Thereafter Revenues $45,000 40,000 30,000 20,000 B eBook Print...

Problem 9-11 Project Evaluation (LO2) Revenues generated by a new fad product are forecast as follows: Year Revenues 1 $52,000 2 30,000 3 20,000 4 10,000 Thereafter 0 Expenses are expected to be 50%...

Revenues generated by a new fad product are forecast as follows: Year 1 2 3 Revenues $50,000 20,000 10,000 5,000 0 Thereafter Expenses are expected to be 60% of revenues, and working capital required...

Revenues generated by a new fad product are forecast as follows Year 1 2 1 Revenue sse, 35. 30,00 22, Bee Thereafter Expenses are expected to be 40% of revenues, and working capital required in each...

Rulix Watch Company reported the following income statement data for a 2-year period. Rulix uses a periodic inventory system. The inventories at January 1, 2013, and December 31, 2014, are correct....

The weights of the various components of the truck are shown. Replace this system of forces by an equivalent resultant force and specify its location measured fromB. 3500 lb 5500 IbV 1750 lb tonti...

answer this 17 Clothing Emporium was organized on January 1, Year 1. The firm was authorized to issue 100,000 shares of $5 par value common stock. During Year 1, Clothing Emporium had the following...

Siesta Inc owns and operates a chain of Mexican - food restaurants across Canada. The restaurants have become wildly popular, largely because each restaurant is carefully designed and decorated to...

What do you think of how Hautelook handled its attendance problem? Was this an appraisal or a discipline problem? What difference would it make in how you handle the problem?

Discuss three steps you would take to reduce the need to dismiss employees.

Suppose, as Kim Galvin says, you have an employee who is very well liked but not meeting the job expectations. What would you do?