Calculate the best-case and worst-case npv figures

Assignment Help Financial Management
Reference no: EM131020702

We are evaluating a project that costs $924,000, has an eight-year life, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 75,000 units per year. Price per unit is $46, variable cost per unit is $31, and fixed costs are $825,000 per year. The tax rate is 35 percent, and we require a 15 percent return on this project. Suppose the projections given for price, quantity, variable costs, and fixed costs are all accurate to within +-10 percent. Calculate the best-case and worst-case NPV figures.

(Negative amounts should be indicated by a minus sign. Do not round intermediate calculations and round your final answers to 2 decimal places. (e.g., 32.16))

NPV

Best case $

Worst case $

Reference no: EM131020702

Questions Cloud

Currently pay dividend-how much is stock currently worth : Netscrape Communications does not currently pay a dividend. You expect the company to begin paying a $2.6 per share dividend in 15 years, and you expect dividends to grow perpetually at 3.6 percent per year thereafter. If the discount rate is 13 perc..
Calculate the future value of this ordinary annuity : You decide to begin saving towards the purchase of a new car in 5 years. If you put $1,000 at the end of each of the next 5 years in a savings account paying 6% compounded annually, how much will you accumulate after 5 years? Calculate the future val..
Compute expected share price-the projected beta of the firm : Suppose the dividends for the Seger Corporation over the past six years were $1.21, $1.29, $1.38, $1.46, $1.56, and $1.61, respectively. Compute the expected share price at the end of 2014 using the perpetual growth method. Assume the market risk pre..
What are the costs of visit from the perspective of society : A practice uses $40 worth of a dentist’s time, $30 worth of a hygienist’s time, $10 worth of supplies, and $15 worth of a billing clerk’s time to produce a visit. The practice charges a patient $25 and charges her insurer $70. The insurer spends an a..
Calculate the best-case and worst-case npv figures : We are evaluating a project that costs $924,000, has an eight-year life, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 75,000 units per year. Price per unit is $46, va..
The following are two of the jobs completed during the year : Leo Company has identified the following overhead costs and cost drivers for next year:
What must the liquidating dividend be : JJ Industries will pay a regular dividend of $0.75 per share for each of the next four years. At the end of four years, the company will also pay out a liquidating dividend. If the discount rate is 12 percent, and the current share price is $75, what..
What is the duration of this bond : A bond currently sells for $1,030, which gives it a yield to maturity of 6%. Suppose that if the yield increases by 30 basis points, the price of the bond falls to $990. What is the duration of this bond?
Zero coupon bond-what was your total return for past year : You purchased a zero coupon bond one year ago for $173.85. The market interest rate is now 9 percent. If the bond had 20 years to maturity when you originally purchased it, what was your total return for the past year? Assume semiannual compounding. ..

Reviews

Write a Review

 

Financial Management Questions & Answers

  Cash flows are expected to grow at an annual rate

You are evaluating the potential purchase of a small business currently generating $42,500 after-tax cash flow (Do=$42,500). On the basis of a review of similar-risk investment opportunities, you must earn an 18% rate of return on the proposed purcha..

  Balance of the savings account as down payment

An investor wants to save for five years for a down payment on a house. She deposits $200 per month into a savings account paying 7% compounded monthly. At the end of the five years, she places the balance of the savings account as a down payment on ..

  Advantages and disadvantages of both public and private debt

What are the attributes, advantages and disadvantages of both public and private debt - When a firm finds projects that are expected to build stockholder wealth

  The discounted payback as compared to the payback method

The discounted payback as compared to the payback method will

  Regarding the beta coefficient

Which of the following statements is FALSE regarding the beta coefficient?

  The weight of debt in the firms capital structure

As a consultant to GBH skiwear, you have been ask to compute the appropriate discount rate to use to evaluate the purchase of a new warehouse facility. The firm's marginal tax rate is 34%. What discount rate should you use to evaluate the warehouse p..

  What is the implied exchange rate

If the price level in Canada is C$18,500, the price level in France is €13,095, and the spot exchange rate is C$1.25/€, What is the internal purchasing power of the Canadian dollar? What is the implied exchange rate of C$/€ that satisfies absolute PP..

  Firm has a profit margin and equity multiplier

A firm has a profit margin of 5% and an equity multiplier of 1.4. Its sales are $150 million, and it has total assets of $75 million. What is its ROE?

  Two issues of debt outstanding

Olympic Sports has two issues of debt outstanding. One is a 7% coupon bond with a face value of $37 million, a maturity of 10 years, and a yield to maturity of 8%. The coupons are paid annually. The other bond issue has a maturity of 15 years, with c..

  What is the market rate of return on this stock

The common stock of Eddie's Engines, Inc. sells for $36.83 a share. The stock is expected to pay $2.80 per share next year. Eddie's has established a pattern of increasing their dividends by 4.9 percent annually and expects to continue doing so. What..

  Provide any group life insurance

Maria has just graduated from college, is single, and has no dependents except for her dog, Albert. She has accepted a job with a starting salary of $40,000 and she has $10,000 in student loan debt. Her employer doesn't provide any group life insuran..

  What is the profit margin-determine the equity ratio

After reviewing the firm’s financial statements, it was determined that the firm’s ROE was 15%. The debt ratio is 30%, and the total asset turnover TAT, is 2.4 times. What is the profit margin? First you must determine the equity ratio ______%, and o..

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