Question

TexMex Food Company is considering a new salsa whose data are shown below. The equipment to...

TexMex Food Company is considering a new salsa whose data are shown below. The equipment to be used would be depreciated by the straight-line method over its 3-year life and would have a zero salvage value, and no change in net operating working capital would be required. Revenues and other operating costs are expected to be constant over the project's 3-year life. However, this project would compete with other TexMex products and would reduce their pre-tax annual cash flows. What is the project's NPV? (Hint: Cash flows are constant in Years 1-3.) Do not round the intermediate calculations and round the final answer to the nearest whole number.

WACC 10.0%
Pre-tax cash flow reduction for other products (cannibalization) -$5,000
Investment cost (depreciable basis) $80,000
Straight-line depr. rate 33.333%
Annual sales revenues $66,000
Annual operating costs (excl. depr.) -$25,000
Tax rate 35.0%
a. $1,684
b. $1,403
c. $1,347
d. $1,094
e. $1,529
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
TexMex Food Company is considering a new salsa whose data are shown below. The equipment to...
TexMex Food Company is considering a new salsa whose data are shown below. The equipment to be used would be depreciated by the straight-line method over its 3-year life and would have a zero salvage value, and no change in net operating working capital would be required. Revenues and other operating costs are expected to be constant over the project's 3-year life. However, this project would compete with other TexMex products and would reduce their pre-tax annual cash flows. What...
TexMex Food Company is considering a new salsa whose data are shown below. The equipment to...
TexMex Food Company is considering a new salsa whose data are shown below. The equipment to be used would be depreciated by the straight-line method over its 3-year life and would have a zero salvage value, and no change in net operating working capital would be required. Revenues and other operating costs are expected to be constant over the project's 3-year life. However, this project would compete with other TexMex products and would reduce their pre-tax annual cash flows. What...
TexMex Food Company is considering a new salsa whose data are shown below. The equipment to...
TexMex Food Company is considering a new salsa whose data are shown below. The equipment to be used would be depreciated by the straight-line method over its 3-year life and would have a zero salvage value, and no change in net operating working capital would be required. Revenues and other operating costs are expected to be constant over the project's 3-year life. However, this project would compete with other TexMex products and would reduce their pre-tax annual cash flows. What...
American Company is considering a new product whose data are shown below. The equipment to be...
American Company is considering a new product whose data are shown below. The equipment to be used would be depreciated by the straight-line method over its 3-year life and would have a zero-salvage value, and no change in net operating working capital would be required. Revenues and other operating costs are expected to be constant over the project's 3-year life. However, this project would compete with other American products and would reduce their pre-tax annual cash flows. What is the...
Genoa Company is considering a new investment whose data are shown below. The equipment would be...
Genoa Company is considering a new investment whose data are shown below. The equipment would be depreciated on a straight-line basis over the project's 3-year life, would have a zero salvage value, and would require additional net operating working capital that would be recovered at the end of the project's life. Revenues and other operating costs are expected to be constant over the project's life. What is the project's NPV? WACC 15.50% Net investment in fixed assets (basis) $75,000 Required...
Foley Systems is considering a new investment whose data are shown below. The equipment would be...
Foley Systems is considering a new investment whose data are shown below. The equipment would be depreciated on a straight-line basis over the project's 3-year life, would have a zero salvage value, and would require some additional working capital that would be recovered at the end of the project's life. Revenues and other operating costs are expected to be constant over the project's life. What is the project's NPV? (Hint: Cash flows are constant in Years 1 to 3.) WACC...
A firm is considering a new investment whose data are shown below. The equipment would be...
A firm is considering a new investment whose data are shown below. The equipment would be depreciated on a straight-line basis over the project's 3-year life, would have a zero salvage value, and would require additional net operating working capital that would be recovered at the end of the project's life. Revenues and other operating costs are expected to be constant over the project's life. What is the project's NPV ( no decimal places)  (Hint: Cash flows from operations are constant...
A firm is considering a new investment whose data are shown below. The equipment would be...
A firm is considering a new investment whose data are shown below. The equipment would be depreciated on a straight-line basis over the project's 3-year life, would have a zero salvage value, and would require additional net operating working capital that would be recovered at the end of the project's life. Revenues and other operating costs are expected to be constant over the project's life. What is the project's NPV ( no decimal places) (Hint: Cash flows from operations are...
A firm is considering a new investment whose data are shown below. The equipment would be...
A firm is considering a new investment whose data are shown below. The equipment would be depreciated on a straight-line basis over the project's 3-year life, would have a zero salvage value, and would require additional net operating working capital that would be recovered at the end of the project's life. Revenues and other operating costs are expected to be constant over the project's life. What is the project's NPV ( no decimal places)  (Hint: Cash flows from operations are constant...
A firm is considering a new investment whose data are shown below. The equipment would be...
A firm is considering a new investment whose data are shown below. The equipment would be depreciated on a straight-line basis over the project's 3-year life, would have a zero salvage value, and would require additional net operating working capital that would be recovered at the end of the project's life. Revenues and other operating costs are expected to be constant over the project's life. What is the project's NPV ( no decimal places)  (Hint: Cash flows from operations are constant...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT