Calculate After Tax Cash Flow-NPV and ROR of the project

Assignment Help Financial Management
Reference no: EM131318875

Consider a project that has 6 years of life time. This project requires investment of $1,000,000 at time zero for machinery and equipment to be depreciated over 5 year with half year straight line depreciation method (starting in year 1 to year 6). Annual revenue is estimated to be $600,000 and annual operating costs of $180,000. Also, $250,000 for working capital investment is needed at time zero and working capital return is expected to equal the initial working capital investment at the end of the project (6 th year). Salvage value of the machinery and equipment is expected to be zero. The minimum After Tax Cash Flow ROR is 12% and the effective income tax rate is 40%. Calculate After Tax Cash Flow, NPV, and ROR of the project.

Reference no: EM131318875

Questions Cloud

The law of one price states that equivalent investment : The Law of One Price states that equivalent investment opportunities trading in different competitive markets will have the same price. Yet, one can find examples where that rule seems to be violated. It is a well-known fact that Americans pay a much..
What is the textbook expense variance : School spent $100,000 on textbooks for the fall 2016 semester. It had expected to have a total enrollment of 450 students who would each have needed four books at a cost of $65 each. What is the textbook expense variance? IS it favorable or unfavorab..
Accepting negative-npv projects and rejecting positive : This chapter demonstrated that the requirement that new projects be accretive to firm EPS sometimes results in accepting negative-NPV projects and rejecting positive-NPV projects. If project earnings are expected to grow at the same rate as the firm'..
What is the company pretax cost of debt : Calculating Cost of Debt. ICU Window, Inc is trying to determine its cost of debt. The firm has a debt issue outstanding with seven years to maturity that is quoted at 96 percent of face value. The issue makes semiannual payments and has embedded cos..
Calculate After Tax Cash Flow-NPV and ROR of the project : Consider a project that has 6 years of life time. This project requires investment of $1,000,000 at time zero for machinery and equipment to be depreciated over 5 year with half year straight line depreciation method (starting in year 1 to year 6). C..
Calculating NPV decision rule : A firm evaluates all of its projects by applying the NPV decision rule. A project under consideration has the following cash flows: What is the NPV for the project if the required return is 12 percent? At a required return of 12 percent, should the f..
Unfunded pension liability-present value of this liability : Asendia USA has an unfunded pension liability of $6 million that must be paid in 20 years. To assess the value of the firm's stock, financial analysts want to discount this liability back to the present. The relevant discount rate is 6.25%. What is t..
Gold standard for currency exchange rates : Most Western nations were on the gold standard for currency exchange rates from 1876 until 1914. Occasionally several parties still call for the "good old days" and a return to the gold standard. Develop an argument as to why this is a good idea.
Variable costs are equal to fifty cents for every dollar : Bell bothers has 3000000 it's fixed cost are estimated to be 1000000, and it's variable costs are equal to fifty cents for every dollar of sales.   the company has 1000000 in debt at tax cost 10%. if sales increased by 20% what expect net income.

Reviews

Write a Review

 

Financial Management Questions & Answers

  What is the sensitivity of the NPV to the price and quantity

McGilla Golf is evaluating a new golf club. The clubs will sell for $875 per set and have a variable cost of $430 per set. The company has spent $150,000 for a marketing study that determined the company will sell 60,000 sets per year for seven years..

  Market neutral position and conservative position

Assume newly issued 30-year-on-the-run bonds sell at higher yields (lower prices) than 29½-year bonds with a nearly identical duration. Would the hedge fund that sells 29½-year bonds and buys 30-year bonds be taking a market neutral position, conserv..

  Rate of inflation expected to prevail for the next year

As of today, the rate of inflation expected to prevail for the next year is 0.2% in the U.S. and 0.3% in the euro zone. What is the expected change in the exchange rate S($/€) for the next year?

  Inventory control system-what is economic ordering quantity

Fisk Corporation is trying to improve its inventory control system and has installed an online computer at its retail stores. Fisk anticipates sales of 49,000 units per year, an ordering cost of $8 per order, and carrying costs of $1.60 per unit. Wha..

  What was the annual increase in selling price

In January 2007, the average price of an asset was $28,658. 7 years earlier, the average price was $20,808. What was the annual increase in selling price? In percentage form

  About the present value

What is the present value of a $1,000 annuity for 10 years, with the first payment occurring at the end of year 10 (that is, ten $1,000 payments occurring at the end of year 10 through 19), given a discount rate of 10 percent?

  Risk-free rate-market risk premium

Stock Y has a beta of 1.35 and an expected return of 15 percent. Stock Z has a beta of 0.8 and an expected return of 11.8 percent. If the risk-free rate is 5.3 percent and the market risk premium is 7.8 percent, are these stocks correctly priced?

  Net value of the payments vs. receipts in todays dollars

Carol Thomas will pay out $18,000 at the end of the year 2, $20,000 at the end of year 3, and receive $22,000 at the end of year 4. With an interest rate of 11 percent, what is the net value of the payments vs. receipts in today's dollars?

  Which mortgage loan has the larger total cost

Consider the following pair of mortgage loan options for a ?$150, 000 mortgage. Which mortgage loan has the larger total cost? (closing costs? + the amount paid for points? + total cost of? interest)? By how? much? Mortgage A has a larger total cost ..

  Compute the maximum waiting time for the completion

Supposing that the home position is the left most position at 1 m from floor, compute the maximum waiting time for the completion of a retrieval operation.

  Choose among three reward options

Kristina just won the lottery, and she must choose among three reward options. She can elect to receive a lump sum today of $62 million, to receive 10 end of year payments of $9.5 million, or to receive 30 end of year payments of $5.6 million. If she..

  Two investments to an already well- diversified portfolio

You must add one of two investments to an already well- diversified portfolio. If you are a risk-averse investor, which one is the better choice?

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd