Your firm manufactures a generic low-cost product. To be more competitive, you are considering expanding your...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Your firm manufactures a generic low-cost product. To be more competitive, you are considering expanding your product line with a new premium version of your product. Below are the details. o Cost of new equipment: $90,000 o Installation cost of equipment: $40,000 o Life of equipment: 5 years, Straight line depreciation o Expected sales: $170,000 per year o Expected reduction in sales of generic product customers shift to the new line: $10,000 per year o Raw material cost: $90,000 per year o New worker salary: $20,000 per year o Required Net working capital over the life of the project: $20,000 o Expected Salvage value of equipment at the end of 5 year: $30,000 o Tax rate: 35%. Assuming a WACC of 15%, what is this project's NPV? Your firm manufactures a generic low-cost product. To be more competitive, you are considering expanding your product line with a new premium version of your product. Below are the details. o Cost of new equipment: $90,000 o Installation cost of equipment: $40,000 o Life of equipment: 5 years, Straight line depreciation o Expected sales: $170,000 per year o Expected reduction in sales of generic product customers shift to the new line: $10,000 per year o Raw material cost: $90,000 per year o New worker salary: $20,000 per year o Required Net working capital over the life of the project: $20,000 o Expected Salvage value of equipment at the end of 5 year: $30,000 o Tax rate: 35%. Assuming a WACC of 15%, what is this project's NPV?
Expert Answer:
Answer rating: 100% (QA)
Calculating the Net Present Value NPV of the Project 1 Identify cash flows Year 0 Initial investment ... View the full answer
Related Book For
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
Posted Date:
Students also viewed these finance questions
-
Introduction Some 25 years ago, one of the authors wrote an article (Stevens, 1989) that sought to explicate the state-of-the-art in supply chain management (SCM). This was at a time when SCM was...
-
Planning is one of the most important management functions in any business. A front office managers first step in planning should involve determine the departments goals. Planning also includes...
-
STEELCO manufactures two types of steel (steel 1 and steel 2) at two locations (plant 1 and plant 2). Three resources are needed to manufacture a ton of steel: iron, coal, and blast furnace time. The...
-
From the following information, determine the book value per share for preferred and common stock assuming $14,400 of dividends are in arrears on the preferred stock. Stockholders' Equity Preferred...
-
30% of the cells in a small organism are not functioning. What is the probability that an organ consisting of 250 cells is functioning if it requires 170 cells to work? Use the normal approximation...
-
Consider the following cash flow profile and assume MARR is 10 percent/year. a. What does Descartes' rule of signs tell us about the IRR(s) of this project? b. What does Norstrom's criterion tell us...
-
The computer workstation furniture manufacturing that Santana Rey started in January is progressing well. As of the end of June, Business Solutions job cost sheets show the following total costs...
-
1) Show a calculation of both the speed and the acceleration of the stopper for the 4 Newton trial. SHOW YOUR WORK BELOW! 2) Make 2 graphs: a. Force versus speed. b. Force versus speed squared. c....
-
Consider the following mixed-integer linear program: 2 + 3> s.t. 4x + 9x2 s 36 7x1 + 5x2 s 35 X1, X2 2 0 and x, integer a. Graph the constraints for this problem. Indicate on your graph all feasible...
-
For each topic noted, briefly describe each item and explain how each requirement is applied in establishing and maintaining payroll systems. Australian Business Number Employment Termination...
-
Whats a response to Great list Caniche. To add, my former employer reduced healthcare costs by conducting a dependent eligibility audit. The company required all employees to submit documentation...
-
answer each question based on internet search. Make sure to provide references of the original sources. What is CASS and what is its purpose? Define MAWB (master air waybill) and HAWB (house air...
-
According to the Detailed Estate Analysis report in the Mensa recommended plan, all of the following are tax efficient assets for adult children to inherit, except__________. Principal residence....
-
the cpp/qpp exemption should be prorated for the number of days since the last payment if the employee is paid by commission on an irrregular basis?
-
What diode reverse breakdown happens?
-
If someone's Z-score for a variable was 0.67. Their score is a significant extreme score. Their score is not significant. O Their score is slightly above average. O Their score is an outlier.
-
Abigail (Abby) Boxer is a single mother working as a civilian accountant for the U.S. Army. Her Social Security number is 676-73-3311 and she lives at 3456 Alamo Way, San Antonio, TX 78249. Helen,...
-
Bev and Ken Hair have been married for 3 years. They live at 3567 River Street, Springfield, MO 63126. Ken is a full-time student at Southwest Missouri State University (SMSU) and Bev works as an...
-
Amy is a calendar-year taxpayer reporting on the cash basis. Please indicate how she should treat the following items for 2012: a. She makes a deductible contribution to an IRA on April 15,...
-
An MMW side looking SAR has the following specifications: radar velocity v = 70 m/s, elevation angle = 35, operating frequency f0 = 94 GHz, and antenna 3 dB beam width 3dB = 65 mrad. (a) Calculate...
-
Consider a synthetic aperture radar. You are given the following Doppler history for a scatterer: {1000 Hz, 0, 1000 HZ}, which corresponds to times {10 ms, 0, 10 ms}. Assume that the observation...
-
A side looking SAR takes on eight positions within an observation interval. In each position, the radar transmits and receives one pulse. Let the distance between any two consecutive antenna...
Study smarter with the SolutionInn App