Question

You are evaluating a capital project with a net investment of $95,000, which includes an increase in net working capital of $5,000. The project has a life of nine years and an expected salvage value of $3,000. The project will be depreciated via simplified straight-line depreciation. Revenues are expected to increase by $20,000 per year and operating expenses by $4,000 per year. The firm’s marginal tax rate is 40%, and the cost of capital for this project is 8%. What is the net present value of this project?

- -$1,641
- -$7,474
- -$5,252
- -$6,040
- -$6,641

Answer #1

You are evaluating a capital project with a Net Investment of
$95,000, which includes an increase in net working capital of
$5,000. The project has a life of 9 years with an expected salvage
value of $3,000. The project will be depreciated via simplified
straight-line depreciation. Revenues are expected to increase by
$20,000 per year and operating expenses by $4,000 per year. The
firm's marginal tax rate is 40 percent and the cost of capital for
this project is 8%....

You are evaluating a capital project with a Net Investment of
$95,000, which includes an increase in net working capital of
$5,000. The project has a life of 9 years with an expected salvage
value of $3,000. The project will be depreciated via simplified
straight-line depreciation. Revenues are expected to increase by
$20,000 per year and operating expenses by $4,000 per year. The
firm's marginal tax rate is 40 percent and the cost of capital for
this project is 8%....

You are evaluating a capital project with a Net Investment of
$400,000, which includes an increase in net working capital of
$16,000. The project has a life of 12 years with an expected
salvage value of $3,000. The project will be depreciated via
simplified straight-line depreciation. Revenues are expected to
increase by $90,000 per year and operating expenses by $8,000 per
year. The firm's marginal tax rate is 40 percent and the cost of
capital for this project is 15%....

You are evaluating a capital project with a Net Investment of
$400,000, which includes an increase in net working capital of
$16,000. The project has a life of 12 years with an expected
salvage value of $3,000. The project will be depreciated via
simplified straight-line depreciation. Revenues are expected to
increase by $90,000 per year and operating expenses by $8,000 per
year. The firm's marginal tax rate is 40 percent and the cost of
capital for this project is 15%....

You are evaluating a capital project with a Net Investment of
$800,000, which includes an increase in net working capital of
$8,000. The project has a life of 20 years with an expected salvage
value of $100,000. The project will be depreciated via simplified
straight-line depreciation. Revenues are expected to increase by
$120,000 per year and operating expenses by $14,000 per year. The
firm's marginal tax rate is 40 percent and the cost of capital for
this project is 12%....

You are evaluating a capital budgeting replacement project with
a net investment of $85,000, which includes both an after-tax
salvage from the old asset of $5,000 and an additional working
capital investment of $10,000. The expected annual incremental cash
flows after-tax is $14,000. The project has a life of 9 years with
an expected terminal value at the end of the project of $13,000.
The cost of capital of the firm is 10 percent and the firm’s
marginal tax rate...

14: A firm is evaluating a new capital project. The firm spent
$45,000 on a market study and $30,000 on consulting three months
ago. If the firm approves the project, it will spend $448,000 on
new machinery, $15,000 on installation, and $5,000 on shipping. The
machine will be depreciated via simplified straight-line
depreciation over its 8-year life. The expected sales increase from
this new project is $700,000 a year, and the expected incremental
expenses are $250,000 a year. In order...

show work on how to get the answer
Your company is evaluating a capital project with equipment
costing $120,600. Shipping costs are estimated at $2000 and
installation is expected to be $1300. This equipment has an
expected life of 18 years and a salvage value of $1400. Revenues
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expenses by $500 per year. An additional working capital investment
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You are a project manager. You are estimating the cash flows of
a potential project that requires an investment of $200,000,
including installation cost, and $30,000 in working capital, which
will be fully recaptured at the end of the project. The machine has
an estimated life of six years and will be depreciated via the
simplified straight-line method. The project is expected to raise
the firm’s annual revenues by $330,000 and increase annual costs by
$125,000. The machine you purchase...

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