Sheila has determined the NPV of a proposed eight-year project to be $24,000 in order to...
Sheila has determined the NPV of a proposed eight-year project to be $24,000 in order to provide a 16% rate of return. She failed to consider a requirement for an additional $40,000 cash outlay for working capital, which would be recoverable at the end of the project. Assume the present value of $1 at 16% to be received after 8 periods is 0.30500. What would the net present value of the project be after considering working capital?
Homework Answers
| Dear Student | |
| Thank you for using homeworklib | |
| Please find below the answer | |
| Statement showing Computations | |
| Particulars | Amount |
| PV of cash outflow - WC | (40,000.00) |
| PV of cash inflow - WC = 40,000*.305 | 12,200.00 |
| Net impact on working capital =-40,000 + 12,200 | (27,800.00) |
| Existing NPV | 24,000.00 |
| net present value of the project be after considering working capital | (3,800.00) |
Add Answer to:
Sheila has determined the NPV of a proposed eight-year project
to be $24,000 in order to...
Swapple Inc. is considering a capital project involving a $40,000 investment in machines and a $40,000...
Swapple Inc. is considering a capital project involving a $40,000 investment in machines and a $40,000 investment in working capital. The equipment is estimated to produce a net cash benefit of $12,000 for each of the next five years. The $40,000 investment in working capital will be recovered at the end of five years. The company has a cost of capital of 14%. Given the present value of an annuity of $1 for five periods at 14% is 3.43308 and...
A project to reduce cost at ABC Ltd has been proposed. It will require a cash...
A project to reduce cost at ABC Ltd has been proposed. It will require a cash outlay of £800,000 and the project will generate cost savings £300,000 in year 2 and £600,000 in year 3. The company's cost of capital is 8% What is the net present value (NPV) of the project? Select one: £66,530 negative £7,250 negative £66,530 positive £7,850 negative
Dweller, Inc. is considering a four-year project that has an initial after-tax outlay or after-tax cost...
Dweller, Inc. is considering a four-year project that has an initial after-tax outlay or after-tax cost of $80,000. The future cash inflows from the project are $40,000, $40,000, $30,000 for years 1,2,3 and 4, respectively. Dweller uses the net present value method and has a discount rate of 12%. Will Dweller accept the project? a) Dweller accepts the projet because it has a positive NPV of over $28,000. b) Dweller rejects the project because the NPV is less than -$4,000...
(Related to Checkpoint 12.1) (Calculating project cash flows and NPV) You are considering expanding your product...
(Related to Checkpoint 12.1) (Calculating project cash flows and NPV) You are considering expanding your product line that currently consists of skateboards to include gas-powered skateboards, and you feel you can sell 9,000 of these per year for 10 years after which time this project is expected to shut down with solar-powered skateboards taking over). The gas skateboards would sell for $120 each with variable costs of $30 for each one produced, and annual fixed costs associated with production would...
x fx Capital Budgeting Capital Budgeting Wenling Consulting Services is considering an eight year investment in...
x fx Capital Budgeting Capital Budgeting Wenling Consulting Services is considering an eight year investment in two projects, A and B. Both projects will have Initial outlay, $120,000, and the terminal cash flow, $11,000. The annual after-tax operating cash flows are as follo 1 $ 3 4 5 6 7 $ $ $ $ $ Project A 31,000.00 28,700.00 23,440.00 23,200.00 21,000.00 19,900.00 18,900.00 16,500.00 $ $ $ $ $ $ $ 5 Project B 19,000.00 19,500.00 22,700.00 24,300.00 27,000.00...
ABC Corporation is considering an expansion project. The proposed project has the following features:(8 points) The proj...
ABC Corporation is considering an expansion project. The proposed project has the following features:(8 points) The project has an initial cost of $2,000,000 (machine: $1,800,000, insurance: $40,000, shipping $60,000, modification: $100,000) --this is also the amount which can be depreciated using the following 3 year MACRS depreciation schedule: Year Depreciation Rate 1 33% 2 45 3 15 4 7 The sales price is expected to increase by 3 percent per year due to inflation. The variable cost is expected to...
NPV and IRR Benson Designs has prepared the following estimates for a long-term project it is...
NPV and IRR Benson Designs has prepared the following estimates for a long-term project it is considering. The initial investment is $15,750, and the project is expected to yield after-tax cash inflows of $4,000 per year for 6 years. The firm has a cost of capital of 12%. a. Determine the net present value (NPV) for the project. b. Determine the intenal rate of retun (IRR) for the project. c. Would you recommend that the firm accept or reject the...
NPV and IRR Benson Designs has prepared the following estimates for a long-term project it is...
NPV and IRR Benson Designs has prepared the following estimates for a long-term project it is considering. The initial investment is $58,850, and the project is expected to yield after-tax cash inflows of $6,000 per year for 15 years. The firm has a cost of capital of 14%. a. Determine the net present value (NPV) for the project. b. Determine the internal rate of return (IRR) for the project. C. Would you recommend that the firm accept or reject the...
1. (25 points) Calder Inc. is considering a four-year project to manufacture military drones. This project...
1. (25 points) Calder Inc. is considering a four-year project to manufacture military drones. This project requires an initial investment of $10 million that will be depreciated straight-line to zero over the project's life. An initial investment in the Net Working Capital of $1.3 million is required to support spare parts inventory; this cost is fully recoverable whenever the project ends. The company believes it can generate $7.35 million in pretax revenues with $2.4 million in total pre-tax operating costs....
NPV and IRR Benson Designs has prepared the following estimates for a long-term project it is...
NPV and IRR Benson Designs has prepared the following estimates for a long-term project it is considering. The initial investment is $24 comma 30024,300, and the project is expected to yield after-tax cash inflows of $3 comma 0003,000 per year for 1313 years. The firm has a cost of capital of 1212%. a. Determine the net present value (NPV) for the project. b. Determine the internal rate of return (IRR) for the project. c. Would you recommend that the firm...
A project to reduce cost at ABC Ltd has been proposed. It will require a cash outlay of £800,000 and the project will generate cost savings £300,000 in year 2 and £600,000 in year 3. The company's cost of capital is 8% What is the net present value (NPV) of the project? Select one: £66,530 negative £7,250 negative £66,530 positive £7,850 negative
(Related to Checkpoint 12.1) (Calculating project cash flows and NPV) You are considering expanding your product line that currently consists of skateboards to include gas-powered skateboards, and you feel you can sell 9,000 of these per year for 10 years after which time this project is expected to shut down with solar-powered skateboards taking over). The gas skateboards would sell for $120 each with variable costs of $30 for each one produced, and annual fixed costs associated with production would...
x fx Capital Budgeting Capital Budgeting Wenling Consulting Services is considering an eight year investment in two projects, A and B. Both projects will have Initial outlay, $120,000, and the terminal cash flow, $11,000. The annual after-tax operating cash flows are as follo 1 $ 3 4 5 6 7 $ $ $ $ $ Project A 31,000.00 28,700.00 23,440.00 23,200.00 21,000.00 19,900.00 18,900.00 16,500.00 $ $ $ $ $ $ $ 5 Project B 19,000.00 19,500.00 22,700.00 24,300.00 27,000.00...
NPV and IRR Benson Designs has prepared the following estimates for a long-term project it is considering. The initial investment is $15,750, and the project is expected to yield after-tax cash inflows of $4,000 per year for 6 years. The firm has a cost of capital of 12%. a. Determine the net present value (NPV) for the project. b. Determine the intenal rate of retun (IRR) for the project. c. Would you recommend that the firm accept or reject the...
NPV and IRR Benson Designs has prepared the following estimates for a long-term project it is considering. The initial investment is $58,850, and the project is expected to yield after-tax cash inflows of $6,000 per year for 15 years. The firm has a cost of capital of 14%. a. Determine the net present value (NPV) for the project. b. Determine the internal rate of return (IRR) for the project. C. Would you recommend that the firm accept or reject the...
1. (25 points) Calder Inc. is considering a four-year project to manufacture military drones. This project requires an initial investment of $10 million that will be depreciated straight-line to zero over the project's life. An initial investment in the Net Working Capital of $1.3 million is required to support spare parts inventory; this cost is fully recoverable whenever the project ends. The company believes it can generate $7.35 million in pretax revenues with $2.4 million in total pre-tax operating costs....
Most questions answered within 3 hours.
-
Where is the error in this code sequence?
String s1 = "Hello";
String s2 = "ello";...
asked 11 months ago -
Financial data for Joel de Paris, Inc., for last year
follow:
Joel de Paris, Inc.
Balance...
asked 11 months ago -
Consider this reaction:
Al2(SO4)3 (aq)+ BaCl3
(aq) Al2Cl6 (aq)- +
3BaSO4(s) . What is the...
asked 11 months ago -
Suppose that Savneet is considering increasing her
recent random sample from 20 car rentals to 40...
asked 11 months ago -
Trucks arrive at an unloading terminal at an average rate of 120
per hour.
Trucks arrive...
asked 11 months ago -
Why are methanol and ethanol completely soluble in water while
octanol is not very little soluble....
asked 11 months ago -
A facilities manager at a university reads in a research report
that the mean amount of...
asked 11 months ago -
When the CuSO4 is rehydrated by adding water to the anhydrous
compound, is this an endothermic...
asked 11 months ago -
A ray of sunlight is passing from diamond into crown glass; the
angle of incidence is...
asked 11 months ago -
A block of mass 0.249 kg is placed on top of a light, vertical
spring of...
asked 11 months ago -
how do the kidneys compensate in the presences of acidosis
a) trigger hyperventilate
b) reserve acid...
asked 11 months ago -
Question 501 pts
The rental rate of capital to the firm increases. Which of the
following...
asked 11 months ago