Question

Bruno's Lunch Counter is expanding and expects operating cash flows of $30,100 a year for 6...

Bruno's Lunch Counter is expanding and expects operating cash flows of $30,100 a year for 6 years as a result. This expansion requires $95,400 in new fixed assets. These assets will be worthless at the end of the project. In addition, the project requires $7,400 of net working capital throughout the life of the project. What is the net present value of this expansion project at a required rate of return of 12 percent?

  • $30,716

  • $32,910

  • $34,738

  • $28,353

  • $24,702

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Present value of inflows=cash inflow*Present value of discounting factor(rate%,time period)

=30100/1.12+30100/1.12^2+.............+30100/1.12^6+7400/1.12^6[Net working capital will be released at end of project]

=30100[1/1.12+1/1.12^2+..............+1/1.12^6]+7400/1.12^6

=(30100*4.111407324)+(7400*0.506631121)

=$127,502.43

Present value of outflows=95400+7400

=$102800

NPV=Present value of inflows-Present value of outflows

=$127,502.43-$102800

=$24702(Approx).

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
Bruno's Lunch Counter is expanding and expects operating cash flows of $25,600 a year for 5...
Bruno's Lunch Counter is expanding and expects operating cash flows of $25,600 a year for 5 years as a result. This expansion requires $69,000 in new fixed assets. These assets will be worthless at the end of the project. In addition, the project requires $5,800 of net working capital throughout the life of the project. What is the net present value of this expansion project at a required rate of return of 13 percent?
Bruno's Lunch Counter is expanding and expects operating cash flows of $28,500 a year for 4...
Bruno's Lunch Counter is expanding and expects operating cash flows of $28,500 a year for 4 years as a result. This expansion requires $67,000 in new fixed assets. These assets will be worthless at the end of the project. In addition, the project requires $4,400 of net working capital throughout the life of the project. What is the net present value of this expansion project at a required rate of return of 11 percent?
Bruno's Motor Shop is expanding and expects operating cash flows of $26,000 a year for 4...
Bruno's Motor Shop is expanding and expects operating cash flows of $26,000 a year for 4 years as a result. This expansion requires $39,000 in new fixed assets. These assets will be worthless at the end of the project. In addition, the project requires $30,000 of net working capital which will be recouped when the project ends. What is the net present value of this expansion project at a required rate of return of 16 percent? a.$20,321.43 b.$38,720.39 c.$22,920.24 d.$46,620.92...
Little Abner's is expanding and expects operating cash flows of $37,000 a year for 4 years...
Little Abner's is expanding and expects operating cash flows of $37,000 a year for 4 years as a result. This expansion requires $39,000 in new fixed assets. These assets will be worthless at the end of the project. In addition, the project requires $3,000 of net working capital throughout the life of the project. What is the net present value of this expansion project at a required rate of return of 16 percent? show all work
The Meldrum Co. expects to sell 3,000 units, ± 15 percent, of a new product. The...
The Meldrum Co. expects to sell 3,000 units, ± 15 percent, of a new product. The variable cost per unit is $8, ± 5 percent, and the annual fixed costs are $12,500, ± 5 percent. The annual depreciation expense is $4,000 and the sale price is $18 a unit, ± 2 percent. The project requires $24,000 of fixed assets which will be worthless when the project ends in six years. Also required is $6,500 of net working capital for the...
Lakeside Winery is considering expanding its wine-making operations. The expansion will require new equipment costing $633,257...
Lakeside Winery is considering expanding its wine-making operations. The expansion will require new equipment costing $633,257 that would be depreciated on a straight-line basis to a zero balance over the four-year life of the project. The estimated salvage value is $199,091. The project requires $35,622 initially for net working capital, all of which will be recovered at the end of the project. The projected operating cash flow is $202,005 a year. What is the net present value of this project...
A new expansion project will produce operating cash flows of $90,000 a year for four years....
A new expansion project will produce operating cash flows of $90,000 a year for four years. During the life of the project, inventory will increase by $35,000 and accounts receivable will decrease by $10,000. Accounts payable will increase by $15,000, and wages payable will increase by $5,000. At the end of the project, net working capital will return to its normal level. The project requires the purchase of equipment at an initial cost of $70,000. Equipment delivery and installation costs...
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.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...
Advantica Restaurant Group, Inc. requires the purchase of $655,000 in new equipment. The company expects to...
Advantica Restaurant Group, Inc. requires the purchase of $655,000 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 $232,000. Initial net working capital equal to 29.00% of sales will be required. All of the net working capital will be recovered at the end of the project. The firm requires a...
A project will produce an operating cash flow of $385,000 a year for three years. The...
A project will produce an operating cash flow of $385,000 a year for three years. The initial cash outlay for equipment will be $850,000. The net aftertax salvage value of $50,000 will be received at the end of the project. The project requires $72,000 of net working capital up front that will be fully recovered. What is the net present value of the project if the required rate of return is 14 percent? $45,915.26 $51,208.72 $59,612.87 $54,174.86 $47,320.15
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT