Question

A firm is planning to purchase a new equipment and answer the following questions according to...

A firm is planning to purchase a new equipment and answer the following questions according to what you have learned.

Data are shown below:

The new equipment will cost $7,500. And it would be depreciated on a straight-line basis over the project's 5-year life (depreciation rate is 20% per year) and would require additional $200 net operating working capital that would be recovered at the end of the project's life. There is no salvage value.

After purchasing this equipment, firm could sell 1000 products per year at $6 per one. And operating costs is 50% of sale revenue. Tax rate is 40% and Weighted average cost of capital is 15%.

Questions: (Please list the necessary steps not only a final number)

Please show the process of CF estimation and based on the CF information you get to answer following questions.

What is the project's NPV? Should the firm purchase this equipment based on NPV?

What is the project's IRR? Should the firm purchase this equipment based on IRR?

What is the project's MIRR?

What is the project's Payback?

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 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...
A company is considering a project which will require the purchase of $705,000 in new equipment....
A company is considering a project which will require the purchase of $705,000 in new equipment. The company expects to sell the equipment at the end of the project for 25% of its original cost, but some assets will remain in the CCA class. Annual sales from this project are estimated at $252,000. Initial net working capital equal to 31.50% of sales will be required. All of the net working capital will be recovered at the end of the project....
Your company is considering a project which will require the purchase of $745,000 in new equipment....
Your company is considering a project which will require the purchase of $745,000 in new equipment. The company expects to sell the equipment at the end of the project for 25% of its original cost, but some assets will remain in the CCA class. Annual sales from this project are estimated at $268,000. Initial net working capital equal to 33.50% of sales will be required. All of the net working capital will be recovered at the end of the project....
Your company is considering a project which will require the purchase of $635,000 in new equipment....
Your company is considering a project which will require the purchase of $635,000 in new equipment. The company expects to sell the equipment at the end of the project for 25% of its original cost, but some assets will remain in the CCA class. Annual sales from this project are estimated at $224,000. Initial net working capital equal to 28.00% of sales will be required. All of the net working capital will be recovered at the end of the project....
Your company is considering a project which will require the purchase of $665,000 in new equipment....
Your company is considering a project which will require the purchase of $665,000 in new equipment. The company expects to sell the equipment at the end of the project for 25% of its original cost, but some assets will remain in the CCA class. Annual sales from this project are estimated at $236,000. Initial net working capital equal to 29.50% of sales will be required. All of the net working capital will be recovered at the end of the project....
Your company is considering a project which will require the purchase of $775,000 in new equipment....
Your company is considering a project which will require the purchase of $775,000 in new equipment. The company expects to sell the equipment at the end of the project for 25% of its original cost, but some assets will remain in the CCA class. Annual sales from this project are estimated at $280,000. Initial net working capital equal to 35.00% of sales will be required. All of the net working capital will be recovered at the end of the project....
Your company is considering a project which will require the purchase of $715,000 in new equipment....
Your company is considering a project which will require the purchase of $715,000 in new equipment. The company expects to sell the equipment at the end of the project for 25% of its original cost, but some assets will remain in the CCA class. Annual sales from this project are estimated at $256,000. Initial net working capital equal to 32.00% of sales will be required. All of the net working capital will be recovered at the end of the project....
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT