Question

Consider the following investment opportunity: Initial cost beginning at time 0 = $15,000 Annual revenues beginning...

Consider the following investment opportunity:

Initial cost beginning at time 0 = $15,000

Annual revenues beginning at time 1 = $20,000

Annual operating costs (not including depreciation) = $13,000

Annual depreciation = $3,000

Tax rate = 40%

Expected life of investment = 5 years

What is the IRR of this investment? Round answer to the tenth place. __%

What is the NPV of this investment? Round answer to the ones place. Do not enter commas. Enter negative numbers with a negative sign. Enter positive numbers without a sign. $­­­­­­__

Should you pursue this investment if the WACC is 10%. Enter yes or no __

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
nitial cost beginning at time 0 = $15,000 Annual revenues beginning at time 1 = $20,000...
nitial cost beginning at time 0 = $15,000 Annual revenues beginning at time 1 = $20,000 Annual operating costs (not including depreciation) = $13,000 Annual depreciation = $3,000 Tax rate = 40% Expected life of investment = 5 years What is the NPV of this investment? Round answer to the ones place. Do not enter commas. Enter negative numbers with a negative sign. Enter positive numbers without a sign. $ Blank 2. Fill in the blank, read surrounding text.
You are trying to value the following investment opportunity: The investment will cost you $23,670 today....
You are trying to value the following investment opportunity: The investment will cost you $23,670 today. In exchange for your investment you will receive monthly cash payments of $5,050 for 9 months. The first payment will occur at the end of the first month. The applicable effective annual interest rate for this investment opportunity is 7%. Calculate the NPV of this investment opportunity. Round to two decimals (do not include the $-sign in your answer).
Question 1: Evaluating investment projects You are planning to invest $50,000 in new equipment. This investment...
Question 1: Evaluating investment projects You are planning to invest $50,000 in new equipment. This investment will generate net cash flows of $30,000 a year for the next 2 years. The salvage value after 2 years is zero. The cost of capital is 25% a year. a) Compute the net present value NPV = $ Enter negative numbers with a minus sign, i.e., -100 not ($100) or (100). Should you invest? Why? YES -- the NPV is positive, which indicates...
Lander Company has an opportunity to pursue a capital budgeting project with a five-year time horizon....
Lander Company has an opportunity to pursue a capital budgeting project with a five-year time horizon. After careful study, Lander estimated the following costs and revenues for the project: Cost of equipment needed $ 250,000 Working capital needed $ 62,000 Overhaul of the equipment in two years $ 19,000 Annual revenues and costs: Sales revenues $ 370,000 Variable expenses $ 190,000 Fixed out-of-pocket operating costs $ 84,000 The piece of equipment mentioned above has a useful life of five years...
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 $3.09 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 $2,132,664 in annual sales, with costs of $805,848. If the tax rate is 34 percent and the required return on the project is 11 percent, what is the project's NPV? (Negative amount should be...
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 $3.11 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 $2064280 in annual sales, with costs of $828848. If the tax rate is 34 percent and the required return on the project is 10 percent, what is the project's NPV? (Negative amount should be...
Drake Corporation is reviewing an investment proposal. The initial cost and estimates of the book value...
Drake Corporation is reviewing an investment proposal. The initial cost and estimates of the book value of the investment at the end of each year, the net cash flows for each year, and the net income for each year are presented in the schedule below. All cash flows are assumed to take place at the end of the year. The salvage value of the investment at the end of each year is equal to its book value. There would be...
Cochrane, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment...
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. Assume the tax rate is 35 percent and the required return on the project is 14 percent. Required: What is the project’s NPV? (Do not include...
A company is considering the purchase of a piece of equipment that would cost $400,000 and...
A company is considering the purchase of a piece of equipment that would cost $400,000 and would last for 9 years. At the end of 9 years, the equipment would have a salvage value of $93,000. The equipment would provide annual cost savings of $73,000. The company requires a minimum pretax return of 17% on all investment projects. (Ignore income taxes.) Required: Provide your Excel input and the final net present value amount you calculated. (If a variable is not...
Consider the following table for the total annual returns for a given period of time. Series...
Consider the following table for the total annual returns for a given period of time. Series Average return Standard Deviation Large-company stocks 11.7 % 20.6 % Small-company stocks 16.4 33.0 Long-term corporate bonds 5.1 8.4 Long-term government bonds 6.1 9.4 Intermediate-term government bonds 5.6 5.7 U.S. Treasury bills 3.8 3.1 Inflation 3.1 4.2 What range of returns would you expect to see 95 percent of the time for long-term corporate bonds? (A negative answer should be indicated by a minus...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT