Calculate npv and irr of proposed investment

Assignment Help Finance Basics
Reference no: EM131435177

Ghost Squadron Historical Aircraft, Inc. (GSHAI) is considering adding a rare World War II B-24 bomber to its collection of vintage aircraft. The plane was forced down in Burma in 1942, and it has remained there ever since. Flying a crew to Burma and collecting the wreckage will cost $100,000. Transporting all the parts to the company's restoration facility in Texas will cost another $35,000. Restoring the plane to flyable condition will cost an additional $600,000 at t0. GSHAI'soperating costs will increase by $40,000 a year at the end of years 1 through 7(on top of the restoration costs). At the end of years 3 through 7, revenues from exhibiting the plane at airshows will be $70,000. At the end of year 7, the plane will be retired. At that time, the plane will be sold to a museum for $500,000. The plane falls into the MACRS depreciation class for seven-year assets. GSHAI's combined federal and state income tax rate is 35 percent, and the company's weighted average cost of capital is 12 percent. Calculate the NPV and IRR of the proposed investment in the plane.

Reference no: EM131435177

Questions Cloud

Determine the future value of a target venture : Determine the future value of a target venture which has net income expected to be $50,000 at the end of four years from now. A comparable firm currently has a stock price of $20.00 per shares; 100,000 shares outstanding; and net income of $50,00..
What cultural factors would protect the patient : In the layperson's (non health care worker) model of stress, what is meant by the terms "stress" or "nerves" when used by a patient, their family and friends? Is it different than the definition used by health care professionals?
What has been described as a caustic personality : The plaintiff is a female employee of your company. Her performance over the years has been adequate but rocky at times. Specifically, she doesn't always get along with fellow workers and has what has been described as a "caustic" personality. Analyz..
What is something that you would do for another person : If money were no issue, what is something that you would do for another person or group of persons to "pay it forward" (besides buying them a cup of coffee in the drive through line)? Why would you like to do it?
Calculate npv and irr of proposed investment : The plane falls into the MACRS depreciation class for seven-year assets. GSHAI's combined federal and state income tax rate is 35 percent, and the company's weighted average cost of capital is 12 percent. Calculate the NPV and IRR of the proposed ..
Main differences between a process costing system : These costing systems are different in many ways. One of the main differences between a process costing system and a job order costing system is that with a job order cost system, only one work in process account is used while separate accounts are m..
Which is worth more a us dollar or a canadian dollar : Suppose the spot exchange rate for the Canadian dollar is Can $1.09 and the six-month forward rate is Can $1.11. a. Which is worth more, a U.S. dollar or a Canadian dollar?
What are some of timplications of global migration : What are some of timplications of global migration relative to your family's health?What effect has the migration of women and children had on global healthcare?What does the migration of healthcare professionals have on global healthcare?
Explain the organizations vision for the future : Illustrate any roadblocks that the organization has faced or potential could face and how they did or might find solutions. Describe the organization's vision for the future.

Reviews

Write a Review

Finance Basics Questions & Answers

  A firm can deliver a negative signal to stockholders by

a firm can deliver a negative signal to stockholders by increasing the level of dividends or by reducing the level of

  When does a stock sell ex dividen

Who are holders of record? When does a stock sell ex dividend?

  How the yield curve may respond to prevailing conditions

How the Yield Curve May Respond to Prevailing Conditions : - Consider how economic conditions affect the default risk premium.

  Nolan inc has sales of 1000000 and an inventory turnover

nolan inc has sales of 1000000 and an inventory turnover of 10.0. the firms current ratio is 3.0 while its quick ratio

  What is country b expected utility for war

If they cant reach and agreement, they go to war, in which case A wins with probability (3/4) and B wins with probability (1/4). If a country wins, it gets the entire $100, and it gets $0 if it loses. If they go to war, each country pays a cost of..

  How much did your father pay for the annuity

You have a wealthy family. Your father decides that he wants you to make your own way and does not want to give you access to much wealth until you are older. Under your father's plan, how much will you receive on the final month of the 30-year per..

  Calculate the amount change

Given that Humphrey Dog Toys Inc.'s stock is currently selling for $50 a share, calculate the amount that Elmer D. will make, or lose, on each of the following transactions

  Is the real world security market line a line

Is the real-world security market line a line? - Draw the security market line if the risk-free rate is 5% and the equity premium is 10%.

  Determine the break-even probability

Using the umbrella decision-making example on page 198 of the textbook, suppose the probability of rain is 0.6, the ruined clothes cost is $30, and the lost umbrella costs are $2. Come to a decision based upon these assumptions, and determine the ..

  How much net income must it earn to meet its capital

If the company follows the residual dividend model, how much net income must it earn to meet its capital budgeting requirements and pay the dividend, all while keeping its capital structure in balance?

  Attracting foreign direct investment

A developing country wants to become more global, hoping to increase the pace of its economic growth and improve the quality of life for its people. It wants to achieve this by attracting foreign direct investment.

  Finding the future value of annuity

Find out the Future Value of the Annuity with $7000 for the  period of 15 years at the interest rate of eight percent per annum?

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