Question

Timmy is analyzing a five-year project with an initial cost of $210,000, a required return of...

Timmy is analyzing a five-year project with an initial cost of $210,000, a required return of 16%, and a likelihood of success of 66%. If the project fails, it will generate an annual after-tax cash flow (ATCF) of –$48,500. If the project succeeds, the annual ATCF will be $79,000. Timmy has further determined that if the project fails, he will shut it down after the first year and lose all of his original investment. If, however, the project is a success, he can expand it with no additional investment and increase the after-tax cash flow to $174,000 a year for Years 2–5. At the end of Year 5, the project would be terminated and have no salvage value. What is the NPV of this project at Time 0?

$46,655
$62,543
$97,753
$101,766
$112,394
Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

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
The company has a project with a 5-year life that requires an initial investment of $210,000,...
The company has a project with a 5-year life that requires an initial investment of $210,000, and is expected to yield annual cash flows of $59,500. What is the net present value of the project if the required rate of return is set at 8%? Net Present Value= ($59,500*???)-210,000 What NPV does the previous calculation yield?  $Note: Round your answer to the nearest whole dollar.
You are considering a new five-year project that requires an initial fixed asset investment of $5...
You are considering a new five-year project that requires an initial fixed asset investment of $5 million. The fixed asset will be depreciated straight-line to zero over its five-year tax life, after which time it will be worthless. The project is estimated to generate $4.5 million in annual sales, with costs of $2 million. Assume the tax rate is 30 percent and the required return on the project is 15 percent. What is the operating cash flow of the project?...
You are considering a new five-year project that requires an initial fixed asset investment of $5...
You are considering a new five-year project that requires an initial fixed asset investment of $5 million. The fixed asset will be depreciated straight-line to zero over its five-year tax life, after which time it will be worthless. The project is estimated to generate $4.5 million in annual sales, with costs of $2 million. Assume the tax rate is 30 percent and the required return on the project is 15 percent. What is the operating cash flow of the project?...
A firm is considering a 4-year project with an initial investment of $400,000. During the first...
A firm is considering a 4-year project with an initial investment of $400,000. During the first year of operation, the project will bring an incremental cash flow of $100,000. The firm expects that the cash flow will grow at 15% annually. The project will be terminated after the fourth year of operation. If the required rate of return for this project is 17%, should the firm accept the project based on NPV criterion? No, because the NPV is -$66,790 Yes,...
Quad Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment...
Quad Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2.85 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 $2,130,000 in annual sales, with costs of $825,000. The project requires an initial investment in net working capital of $350,000, and the fixed asset will have a market value of $235,000 at the end...
A firm is considering a 4-year project with an initial investment of $400,000. During the first...
A firm is considering a 4-year project with an initial investment of $400,000. During the first year of operation, the project will bring an incremental cash flow of $100,000. The firm expects that the cash flow will grow at 15% annually. The project will be terminated after the fourth year of operation. If the required rate of return for this project is 17%, should the firm accept the project based on NPV criterion? Group of answer choices Indifferent, because the...
You are considering a 10-year project: An initial investment (today) in equipment of $900,000 is required....
You are considering a 10-year project: An initial investment (today) in equipment of $900,000 is required. There will be no salvage value for this equipment after 10 years. The equipment is depreciated using the straight-line method, $90,000/year for 10 years. Annual expected revenues are $700,000/year for 10 years (beginning 1 year from today). Annual expected operating expenses are $250,000/year for 10 years (beginning 1 year from today). This $250,000 does not include depreciation. The tax rate is 35%. An investment...
We are examining a new project. We expect to sell 5,200 units per year at $66...
We are examining a new project. We expect to sell 5,200 units per year at $66 net cash flow apiece for the next 10 years. In other words, the annual cash flow is projected to be $66 × 5,200 = $343,200. The relevant discount rate is 17 percent, and the initial investment required is $1,510,000. After the first year, the project can be dismantled and sold for $1,230,000. Suppose you think it is likely that expected sales will be revised...
Summer Tyme, Inc., is considering a new 3-year expansion project that requires an initial fixed asset...
Summer Tyme, Inc., is considering a new 3-year expansion project that requires an initial fixed asset investment of $2.916 million. The fixed asset will be depreciated straight-line to zero over its 3-year tax life, after which time it will have a market value of $226,800. The project requires an initial investment in net working capital of $324,000. The project is estimated to generate $2,592,000 in annual sales, with costs of $1,036,800. The tax rate is 31 percent and the required...
uad Enterprises is considering a new 3-year expansion project that requires an initial fixed asset investment...
uad Enterprises is considering a new 3-year expansion project that requires an initial fixed asset investment of $2.16 million. The fixed asset will be depreciated straight-line to zero over its 3-year tax life, after which time it will have a market value of $168,000. The project requires an initial investment in net working capital of $240,000. The project is estimated to generate $1,920,000 in annual sales, with costs of $768,000. The tax rate is 22 percent and the required return...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT