Question

You are considering a new five-year project that requires an initial fixed asset investment of $5...

  1. You are considering a new five-year project that requires an initial fixed asset investment of $5 million. The fixed asset will be depreciated straight-line to zero over its five-year tax life, after which time it will be worthless. The project is estimated to generate $4.5 million in annual sales, with costs of $2 million. Assume the tax rate is 30 percent and the required return on the project is 15 percent.
  1. What is the operating cash flow of the project? (10 points)

b.What is the project’s NPV? (10 points)

Homework Answers

Answer #1

Depreciation = 5,000,000 / 5 = 1,000,000

Operating cash flow = 2,050,000 x 5 = 10,250,000

NPV = 1,871,917.95(rounded to two decimals)

(formula for NPV can be seen in the formula bar)

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
You are considering a new five-year project that requires an initial fixed asset investment of $5...
You are considering a new five-year project that requires an initial fixed asset investment of $5 million. The fixed asset will be depreciated straight-line to zero over its five-year tax life, after which time it will be worthless. The project is estimated to generate $4.5 million in annual sales, with costs of $2 million. Assume the tax rate is 30 percent and the required return on the project is 15 percent. What is the operating cash flow of the project?...
Quad Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment...
Quad Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2.29 million. The fixed asset will be depreciated straight-line to zero over its three-year tax life, after which time it will be worthless. The project is estimated to generate $1,810,000 in annual sales, with costs of $720,000. The tax rate is 25 percent and the required return on the project is 13 percent. What is the project’s NPV?
Keiper, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment...
Keiper, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment of $2.7 million. The fixed asset will be depreciated straight-line to zero over its three-year tax life, after which time it will be worthless. The project is estimated to generate $2,080,000 in annual sales, with costs of $775,000. The tax rate is 35 percent and the required return on the project is 12 percent. What is the project’s NPV?
Quad Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment...
Quad Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2.18 million. The fixed asset will be depreciated straight-line to zero over its three-year tax life, after which time it will be worthless. The project is estimated to generate $1,730,000 in annual sales, with costs of $640,000. The tax rate is 24 percent and the required return on the project is 13 percent. What is the project’s NPV?
Quad Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment...
Quad Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2.29 million. The fixed asset will be depreciated straight-line to zero over its three-year tax life, after which time it will be worthless. The project is estimated to generate $1,715,000 in annual sales, with costs of $625,000. The tax rate is 21 percent and the required return on the project is 10 percent. What is the project’s NPV? (Do not round intermediate calculations....
Quad Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment...
Quad Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2.85 million. The fixed asset will be depreciated straight-line to zero over its three-year tax life, after which time it will be worthless. The project is estimated to generate $2,130,000 in annual sales, with costs of $825,000. The project requires an initial investment in net working capital of $350,000, and the fixed asset will have a market value of $235,000 at the end...
Keiper, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment...
Keiper, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment of $2.67 million. The fixed asset will be depreciated straight-line to zero over its three-year tax life, after which time it will be worthless. The project is estimated to generate $2,070,000 in annual sales, with costs of $765,000. The tax rate is 34 percent and the required return on the project is 13 percent. What is the project’s NPV? (Round your answer to 2...
Keiper, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment...
Keiper, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment of $2.91 million. The fixed asset will be depreciated straight-line to zero over its three-year tax life, after which time it will be worthless. The project is estimated to generate $2,150,000 in annual sales, with costs of $845,000. The tax rate is 30 percent and the required return on the project is 11 percent. What is the project’s NPV? (Round your answer to 2...
Quad Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment...
Quad Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $1.96 million. The fixed asset will be depreciated straight-line to zero over its three-year tax life, after which time it will be worthless. The project is estimated to generate $1.905 million in annual sales, with costs of $485,000. The tax rate is 21 percent. Suppose the required return on the project is 7 percent. What is the project’s NPV? Select one: A. $1,256,087.76...
Quad Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment...
Quad Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2.29 million. The fixed asset will be depreciated straight-line to zero over its three-year tax life, after which time it will be worthless. The project is estimated to generate $1,715,000 in annual sales, with costs of $625,000. The tax rate is 21 percent and the required return on the project is 10 percent. What is the project’s NPV? (Do not round intermediate calculations....
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT