Question

Winston Hardware is analyzing a proposed project that requires an initial investment of $39,900 for fixed assets and $9,900 for net working capital. The project is expected to produce operating cash flows of $11,400 a year for 4 years. The net working capital can be recouped at the end of the project. The fixed assets have an estimated aftertax salvage value of $16,900. Should this project be accepted if the required rate of return is 13.9 percent? Why or why not? What is the NPV?

Answer #1

Since the NPV is negative, project should not be accepted.

A firm is deciding on a new project.
-initial costs $450,000 for fixed assets, will depreciate straight
line to zero over 3 year project life
-fixed assets have estimated salvage value of $30,000 at the end of
project
-project requires an additional $100,000 for net working capital to
start the project
-net working capital will be recouped at the end of 3 years
-annual sales of $1,000,000 (1,000 units at $1,000) and total costs
of $550,000/year
-tax rate is 40%...

A project has an initial requirement of $177685 for new
equipment and $9227 for net working capital. The installation costs
are expected to be $12515. The fixed assets will be depreciated to
a zero book value over the 4-year life of the project and have an
estimated salvage value of $135789. All of the net working capital
will be recouped at the end of the project. The annual operating
cash flow is $98459 and the cost of capital is 7%...

Quad Enterprises is considering a new three-year expansion
project that requires an initial fixed asset investment of $2.52
million. The fixed asset will be depreciated straight-line to zero
over its three-year tax life and is estimated to have a market
value of $294584 at the end of the project. The project is
estimated to generate $2146553 in annual sales, with costs of
$809789. The project requires an initial investment in net working
capital of $360133. If the tax rate is...

Quad Enterprises 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 and is estimated to have a market
value of $297260 at the end of the project. The project is
estimated to generate $2043001 in annual sales, with costs of
$843186. The project requires an initial investment in net working
capital of $374861. If the tax rate is...

A firm is deciding on a new project.
Use the following information for the project evaluation and
analysis:
- The initial costs are
$450,000 for fixed assets. The fixed assets will be depreciated
straight line to a zero book value over the 3-year
life of the project. The fixed assets have an estimated salvage
value of $30,000 at the end of the project.
- The project also
requires an additional $100,000 for net working capital to start
the...

quad enterprises is considering a new three-year expansion
project that requires an initial fixed asset investment of 2.38
million.The fixed asset qualifies for 100 percent bonus
depreciation in the first year. The project is estimated to
generate 1,805,000 in annual sales, with costs of 696,000. The
project requires an initial investment in net working capital of
444,000, and the fixed asset will have a market value of 465,000 at
the end of the project.
a. If the tax rate is...

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...

Cochrane, Inc., is considering a new three-year expansion
project that requires an initial fixed asset investment of $2.1
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 $1,140,000.The project requires an
initial investment in net working capital of $150,000, and the
fixed asset will have a market value of $175,000 at the end of...

6. A firm is deciding on a new project. Use the following
information for the project evaluation and analysis: - The initial
costs are $450,000 for fixed assets. The fixed assets will be
depreciated straight line to a zero book value over the 3-year life
of the project. The fixed assets have an estimated salvage value of
$30,000 at the end of the project. - The project also requires an
additional $100,000 for net working capital to start the project....

Quad Enterprises is considering a new 3-year expansion project
that requires an initial fixed asset investment of $2.5 million.
The fixed asset falls into the 3-year MACRS class (MACRS Table) and
will have a market value of $197,400 after 3 years. The project
requires an initial investment in net working capital of $282,000.
The project is estimated to generate $2,256,000 in annual sales,
with costs of $902,400. The tax rate is 21 percent and the required
return on the project...

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