Question

Jasper Metals is considering installing a new molding machine which is expected to produce operating cash flows of $57,000 per year for 7 years. At the beginning of the project, inventory will decrease by $17,600, accounts receivables will increase by $21,800, and accounts payable will increase by $15,600. At the end of the project, net working capital will return to the level it was prior to undertaking the new project. The initial cost of the molding machine is $255,000. The equipment will be depreciated straight-line to a zero book value over the life of the project. The equipment will be salvaged at the end of the project creating an aftertax cash flow of $52,000. What is the net present value of this project given a required return of 10.2 percent? A) $60,349 B) $50,364 C) $52,418 D) $63,408 E) $52,653

Answer #1

Jasper Metals is considering installing a new molding machine which
is expected to produce operating cash flows of $60,000 per year for
7 years. At the beginning of the project, inventory will decrease
by $20,000, accounts receivables will increase by $23,000, and
accounts payable will increase by $16,500. At the end of the
project, net working capital will return to the level it was prior
to undertaking the new project. The initial cost of the molding
machine is $264,000. The...

Jasper Metals is considering installing a new molding machine
which is expected to produce operating cash flows of $58,000 per
year for 7 years. At the beginning of the project, inventory will
decrease by $18,400, accounts receivables will increase by $22,200,
and accounts payable will increase by $15,900. At the end of the
project, net working capital will return to the level it was prior
to undertaking the new project. The initial cost of the molding
machine is $258,000. The...

Jasper Metals is considering installing a new molding machine
which is expected to produce operating cash flows of $61,000 per
year for 7 years. At the beginning of the project, inventory will
decrease by $20,800, accounts receivables will increase by $23,400,
and accounts payable will increase by $16,800. At the end of the
project, net working capital will return to the level it was prior
to undertaking the new project. The initial cost of the molding
machine is $267,000. The...

Jasper Metals is considering installing a new molding machine is
expected to produce operating cash flows of $58,000 per year for 7
years. At the beginning of the project, inventory will decrease by
$18,400, accounts receivables will increase by $22,200, and
accounts payable will increase by $15,900. At the end of the
project, net working capital will return to the level it was prior
to undertaking the new project. The initial cost of the molding
machine is $258,000. The equipment...

Jasper Metals is considering installing a new molding machine
which is expected to produce operating cash flows of $55,000 per
year for 7 years. At the beginning of the project, inventory will
decrease by $16,000, accounts receivables will increase by $21,000,
and accounts payable will increase by $15,000. At the end of the
project, net working capital will return to the level it was prior
to undertaking the new project. The initial cost of the molding
machine is $249,000. The...

Jasper Metals is considering installing a new molding machine
which is expected to produce operating cash flows of $62,000 per
year for 7 years. At the beginning of the project, inventory will
decrease by $21,600, accounts receivables will increase by $23,800,
and accounts payable will increase by $17,100. At the end of the
project, net working capital will return to the level it was prior
to undertaking the new project. The initial cost of the molding
machine is $270,000. The...

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...

16. Notational Inc. is considering installing a new server. The
machine costs $100,000 and is expected to have a useful economic
life of 8 years, after which it will have a book value of $0. In
addition to the equipment costs, management expects installation
costs of $10,000 and an initial outlay for net working capital of
$12,000. The new server is expected to generate an additional
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Wellpoint Company is considering an investment project that will
produce an operating cash flow of $415,200 a year for five years.
The initial cash outlay for equipment will be $1,027,000. An
aftertax salvage value of $82,160 for the equipment will be
received at the end of the project. The project requires $154,050
of net working capital that will be fully recovered. What is the
net present value of the project if the required rate of return is
14 percent?
$388,174.80...

A project will produce an operating cash flow of $358,000 a year
for four years. The initial cash outlay for equipment will be
$785,000. The net aftertax salvage value of $42,000 will be
received at the end of the project. The project requires $78,000 of
net working capital that will be fully recovered when the project
ends. What is the net present value of the project if the required
rate of return is 14 percent?
$237,613
$251,159
$274,300
$290,184
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