Question

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 are expected to increase by $15,000 per year and cash operating expenses by $500 per year. An additional working capital investment of $900 is also required, and the firm’s marginal tax rate is 40 percent, and its weighted average cost of capital is 8%. Assume simplified straight line depreciation.

IO = $124,800 ; Δ Depr1-18 = $6883.33 ; NCF1-18 = $11,453 ; NCF18 = $1740

What is the Initial Outlay for this project?

What are the Net Cash Flows per year of this project?

What are the one-time, end of project Cash Flows from this project, if any?

Answer #1

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...

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...

Suppose Pheasant Pharmaceuticals is evaluating a proposed
capital budgeting capital project that will require an initial
investment of $3,225,000. The project is expected to generate the
following net cash flows:
Year
Cash Flow
1
$375,000
2
$425,000
3
$500,000
4
$400,000
Pheasant's weighted average cost of capital (WACC) is 8%. Based on
the cash flows, what is this project's NPV?
A. -$2,186,977
B. -$1,422,481
C. -$1,822,481
D. -$5,047,481

Suppose Cute Camel Woodcraft Company is evaluating a proposed
capital budgeting project (project Alpha) that will require an
initial investment of $450,000. The project is expected to generate
the following net cash flows:
Year
Cash Flow
Year 1
$375,000
Year 2
$475,000
Year 3
$400,000
Year 4
$500,000
Cute Camel Woodcraft Company’s weighted average cost of capital
is 10%, and project Alpha has the same risk as the firm’s average
project. Based on the cash flows, what is project Alpha’s...

Suppose Happy Dog Soap Company is evaluating a proposed capital
budgeting project (project Alpha) that will require an initial
investment of $600,000. The project is expected to generate the
following net cash flows:
Year Cash Flow
Year 1 $275,000
Year 2 $450,000
Year 3 $450,000
Year 4 $475,000
1. Happy Dog Soap Company’s weighted average cost of capital is
8%, and project Alpha has the same risk as the firm’s average
project. Based on the cash flows, what is project...

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
$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
$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 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%....

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 8 minutes ago

asked 15 minutes ago

asked 19 minutes ago

asked 31 minutes ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 2 hours ago

asked 2 hours ago

asked 2 hours ago

asked 2 hours ago