Question

An initial capital investment is $360,000 and has a 6-year life. Working capital is $40,000. Total...

An initial capital investment is $360,000 and has a 6-year life. Working capital is $40,000. Total net profit after taxes over 6 years is estimated at $167,000.

Find The Rate of return on the investment (ROI)

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Rate of return on the investment (ROI)

Annual Net Profit = Total Net Profit over 6 years / Number of years

= $167,000 / 6 Years

= $27,833.33 per year

Initial Investment = Initial Capital Investment + Working Capital Required

= $360,000 + $40,000

= $400,000

Therefore, the Rate of return on the investment (ROI) = [Annual Net Profit / Initial Investment] x 100

= [$27,833.33 / $400,000] x 100

= 6.96%

“Hence, the Rate of return on the investment (ROI) will be 6.96%”

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 project has an initial investment in equipment of​ $310,000 and in net working capital of​...
A project has an initial investment in equipment of​ $310,000 and in net working capital of​ $62,000. The equipment will be depreciated over the​ 3-year life of the project to a salvage value of​ $155,000. All of the net working capital will be recouped at the end of the project. The annual operating cash flow is​ $345,000 and the discount rate is 25 percent. What is the​ project's net present value if the tax rate is 34​ percent? A. ​$380,800.00...
The Apple Company is considering investing in an investment that requires $100,000 plus an increased working...
The Apple Company is considering investing in an investment that requires $100,000 plus an increased working capital of $10,000. The investment has a 4-year life. Annual after-tax cash flows from operations will be $40,000 for each of the 4-year .The working capital will be released at the end of the 4th year. What is the net present value of the investment if the required rate of return is 12%? The present value of a single amount over four years at...
The total capital investment for a conventional chemical plant is $1.5 million and the plant produces...
The total capital investment for a conventional chemical plant is $1.5 million and the plant produces 3 million kg of product annually. The selling price of the product is $0.82/kg. Working capital can be assumed 15% of TCI . The raw material cost for the product are $0.09/kg of product , labor and maintenance cost, $0.08/kg of product, utilities , $0.05/kg of product, and overhead and other fix costs, $0.008/kg of product. General expenses other than depreciation are 5% of...
A rm is considering an investment project with the following information: Initial capital expenditure $36 million...
A rm is considering an investment project with the following information: Initial capital expenditure $36 million Annual sales (in units) 2 million units Selling price per unit $20 Cost per unit $10 Project life 3 years Depreciation Straight line, over the life of the project Working capital Initially (Year 0) the project requires an increase in net working capital of $6 million, but it will be recovered after the project's life (Year 3). Tax rate 20% WACC 15% (a) What...
A business is considering a new 3-year expansion project that requires an initial fixed asset investment...
A business is considering a new 3-year expansion project that requires an initial fixed asset investment of $730,019. The fixed asset will be depreciated straight-line to 64,171 over its 3-year tax life, after which time it will have a market value of $92,583. The project requires an initial investment in net working capital of $75,117. The project is estimated to generate $202,956 in annual sales, with costs of $127,920. The tax rate is 0.22 and the required return on the...
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...
XZ Inc. is considering a three-year project. The initial investment on the fixed asset will be...
XZ Inc. is considering a three-year project. The initial investment on the fixed asset will be $900,000. Fixed asset will be depreciated using straight-line method to zero over the life of the project. The net working capital investment will be $250,000. The project is estimated to generate $500,000 in annual sales, with cost of $150,000. Assume the tax rate is 34% and required return is 8%, what is the NPV of this project?
XY Inc. is considering a three-year project. The initial investment on the fixed asset will be...
XY Inc. is considering a three-year project. The initial investment on the fixed asset will be $90,000. Fixed asset will be depreciated using straight-line method to zero over the life of the project. The net working capital investment will be $50,000. The project is estimated to generate $200,000 in annual sales, with cost of $150,000. Assume the tax rate is 35% and required return is 10%, what is the NPV of this project? $-33,065 $30,971 $15,428
XYZ Inc. is considering a three-year project. The initial investment on the fixed asset will be...
XYZ Inc. is considering a three-year project. The initial investment on the fixed asset will be $900,000. Fixed asset will be depreciated using straight-line method to zero over the life of the project. The net working capital investment will be $250,000. The project is estimated to generate $500,000 in annual sales, with cost of $150,000. Assume the tax rate is 34% and required return is 10%, what is the NPV of this project? Group of answer choices $302,570 $170,518 -$321,878
XYZ Inc. is considering a three-year project. The initial investment on the fixed asset will be...
XYZ Inc. is considering a three-year project. The initial investment on the fixed asset will be $900,000. Fixed asset will be depreciated using straight-line method to zero over the life of the project. The net working capital investment will be $250,000. The project is estimated to generate $500,000 in annual sales, with cost of $150,000. Assume the tax rate is 34% and required return is 10%, what is the NPV of this project? Group of answer choices $302,570 $170,518 -$321,878
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT