Question: URGENT!! PLEASE HELP!! When inputting an answer, round your answer to the nearest 2 decimal places. If you need to use a calculated number for
URGENT!! PLEASE HELP!!
When inputting an answer, round your answer to the nearest 2 decimal places. If you need to use a calculated number for further calculations, DO NOT round until after all calculations have been completed. For the final answer, Round to 2 decimal places.
| Q5) Your corporation is considering investing in a new product line. The annual revenues (sales) for the new product line are expected to be $160,775.00 with variable costs equal to 50% of these sales. In addition annual fixed costs associated with this new product line are expected to be $65,304.00 . The old equipment currently has no market value. The new equipment cost $70,663.00 . The new equipment will be depreciated to zero using straight-line depreciation for the three-year life of the project. At the end of the project the equipment is expected to have a salvage value of $14,815.00 . An increase in net working capital of $67,065.00 is also required for the life of the project. The corporation has a beta of 1.238 , a tax rate of 41.68% , and a target capital structure consisting of 45.63% equity and 54.37% debt. Treasury securities have a yield of 2.86% and the expected return on the market is 7.62% . In addition, the company currently has outstanding bonds that have a yield to maturity of 8.39%. |
| a) What is the total initial cash outflow? (show as negative number - 2.5 Points) |
| b) What are the estimated annual operating cash flows? (2.5 points) |
| c) What is the terminal cash flow? (2.5 points) |
| d) What is the corporations cost of equity? (2.5 points) |
| e) What is the WACC? (2.5 points) |
| f) What is the NPV for this project? (2.5 points) |
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