Question

A firm has projected the following financials for a possible project: YEAR 0 1 2 3...

A firm has projected the following financials for a possible project:

YEAR 0 1 2 3 4 5
Sales 127,244.00 127,244.00 127,244.00 127,244.00 127,244.00
Cost of Goods 63,531.00 63,531.00 63,531.00 63,531.00 63,531.00
S&A 30,000.00 30,000.00 30,000.00 30,000.00 30,000.00
Depreciation 22,240.20 22,240.20 22,240.20 22,240.20 22,240.20
Investment in NWC 1,146.00 503.00 503.00 503.00 503.00 503.00
Investment in Gross PPE 111,201.00


The firm has a capital structure of 33.00% debt and 67.00% equity. The cost of debt is 9.00%, while the cost of equity is estimated at 14.00%. The tax rate facing the firm is 39.00%. (Assume that you can't recover the final NWC position in year 5. i.e. only consider the change in NWC for each year)

What is the NPV of the project? (Hint: Be careful about rounding the WACC here!)

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
A firm has projected the following financials for a possible project: YEAR 0 1 2 3...
A firm has projected the following financials for a possible project: YEAR 0 1 2 3 4 5 Sales 134,539.00 134,539.00 134,539.00 134,539.00 134,539.00 Cost of Goods 68,336.00 68,336.00 68,336.00 68,336.00 68,336.00 S&A 30,000.00 30,000.00 30,000.00 30,000.00 30,000.00 Depreciation 22,704.00 22,704.00 22,704.00 22,704.00 22,704.00 Investment in NWC 1,201.00 511.00 511.00 511.00 511.00 511.00 Investment in Gross PPE 113,520.00 The firm has a capital structure of 38.00% debt and 62.00% equity. The cost of debt is 9.00%, while the cost of...
A firm has projected the following financials for a possible project: YEAR 0 1 2 3...
A firm has projected the following financials for a possible project: YEAR 0 1 2 3 4 5 Sales 123,691.00 123,691.00 123,691.00 123,691.00 123,691.00 Cost of Goods 64,421.00 64,421.00 64,421.00 64,421.00 64,421.00 S&A 30,000.00 30,000.00 30,000.00 30,000.00 30,000.00 Depreciation 22,415.20 22,415.20 22,415.20 22,415.20 22,415.20 Investment in NWC 1,202.00 588.00 588.00 588.00 588.00 588.00 Investment in Gross PPE 112,076.00 The firm has a capital structure of 41.00% debt and 59.00% equity. The cost of debt is 9.00%, while the cost of...
ABC Corporation has hired you to evaluate a new FOUR year project for the firm. The...
ABC Corporation has hired you to evaluate a new FOUR year project for the firm. The project will require the purchase of a $835,100.00 work cell. Further, it will cost the firm $53,300.00 to get the work cell delivered and installed. The work cell will be straight-line depreciated to zero with a 20-year useful life. The project will require new employees to be trained at a cost of $61,400.00. The project will also use a piece of equipment the firm...
A stand-alone capital project has the following projected cash flows: Year 0 1 2 3 Cash...
A stand-alone capital project has the following projected cash flows: Year 0 1 2 3 Cash flow ($4,000) $1,500 $1,200 $2,395 If the firm's cost of capital is 14%, which of the following statements is true? a.the IRR is greater than the cost of capital and the project should be undertaken b.the project should be rejected because the IRR is 12%, which is less than the project's cost of capital c.the IRR is less than 12% and the project should...
A firm has projected future cashflows as follows: $11,000, $14,000, and $10,000 in Year 1, 2,...
A firm has projected future cashflows as follows: $11,000, $14,000, and $10,000 in Year 1, 2, and 3, respectively. 1. If the required initial investment amount is $26,000 today and the required return is 14%, what is the NPV? 2. If the NPV is negative, calculate the IRR. At what discount rate does the project NPV turn positive?
RiverRocks, Inc., is considering a project with the following projected free cash​ flows: Year 0 1...
RiverRocks, Inc., is considering a project with the following projected free cash​ flows: Year 0 1 2 3 4 Cash Flow ​(in millions) negative $ 50.8−$50.8 $ 9.3$9.3 $ 19.6$19.6 $ 19.3$19.3 $ 14.1$14.1 The firm believes​ that, given the risk of this​ project, the WACC method is the appropriate approach to valuing the project.​ RiverRocks' WACC is 12.6 %12.6%. Should it take on this​ project? Why or why​ not? The net present value of the project is ​$negative 4.791−4.791...
A firm has projected free cash flows of $575,000 for Year 1, $625,000 for Year 2,...
A firm has projected free cash flows of $575,000 for Year 1, $625,000 for Year 2, and 750,000 for Year 3. The projected terminal value at the end of Year 3 is $8,000,000. The firm's Weighted Average cost of Capital (WACC) is 12.5%. Please post the answer in an Excel Document Determine the Discounted Cash Flow (DCF) value of the firm. Recommend acceptance of this project using net present value criteria. Display your calculations.
A firm with no preferred stock outstanding has a debt-to-equity ratio of D/E = 1.25, an...
A firm with no preferred stock outstanding has a debt-to-equity ratio of D/E = 1.25, an effective annual before-tax cost of debt of 6.5%, and a cost of equity of 14.2%. Additionally, the firm faces a 32% tax rate. A firm is considering a project with zero NWC or salvage cash flows. What is the NPV of a project with an initial investment of $12 million that generates incremental after-tax cash flows of OCF= $2,000,000 per year over the project's...
A project has the following projected cash flows Year 0- R280,000( investment) Year 1 R70,000 Year...
A project has the following projected cash flows Year 0- R280,000( investment) Year 1 R70,000 Year 2 R100,000 Year 3 R130,000 a) Assuming a discount rate of 10% what is the Net Present Value (NPV) of this project over the 3 year period? b) Based on your answer above, should the project be recommended for acceptance? c) would your answer to b above change if the discount rate was 5%? Why? d) what do you understand by the term nominal...
​RiverRocks, Inc., is considering a project with the following projected free cash​ flows: Year 0 1...
​RiverRocks, Inc., is considering a project with the following projected free cash​ flows: Year 0 1 2 3 4 Cash Flow ​(in millions) −$50.2 $9.1 $19.9 $20.8 $14.2 The firm believes​ that, given the risk of this​ project, the WACC method is the appropriate approach to valuing the project.​ RiverRocks' WACC is 11.4 %. What is the net present value of this project in millions??
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT