Reference no: EM131188056
Sheridan Films is considering some new equipment whose data are shown below. The equipment has a 3-year tax life and would be fully depreciated by the straight-line method over 3 years, but it would have a positive pre-tax salvage value at the end of Year 3, when the project would be closed down. Also, some new working capital would be required, but it would be recovered at the end of the project's life. Revenues and other operating costs are expected to be constant over the project's 3-year life. What is the project's NPV?
WACC 10.0%
Net investment in fixed assets (depreciable basis) $70,000
Required new working capital $10,000
Straight-line deprec. rate 33.333%
Sales revenues, each year $75,000
Operating costs (excl. deprec.), each year $30,000
Expected pretax salvage value $5,000
Tax rate 35.0%
Project is expected to create operating cash flows
: A project is expected to create operating cash flows of $30,000 a year for three years. The initial cost of the fixed assets is $62,000. These assets will be worthless at the end of the project. An additional $5,000 of net working capital will be req..
|
Current liabilities are proportional to sales
: The most recent financial statements for Summer Tyme, Inc., are shown here: Income Statement Balance Sheet Sales $4,100 Current assets $4,900 Current liabilities $890 Costs 2,500 Fixed assets 6,000 Long-term debt 3,590 Taxable income $1,600 Equity 6,..
|
Unadjusted rate of return using average investment method
: Average annual net income =$70,000, Original investment amount = $ 410,000, Unrecovered assets cost at the end of useful life (salvage value) =$41,000. compute the unadjusted rate of return using the original investment amount. compute the unadjusted..
|
An investor owns some stock in general refrigeration
: An investor owns some stock in General Refrigeration & Cooling. The stock recently underwent a 5-for-2 stock split. If the stock was trading at $50 per share just before the split, how much is each share most likely selling for after the split? If th..
|
Positive pre-tax salvage value at the end of year
: Sheridan Films is considering some new equipment whose data are shown below. The equipment has a 3-year tax life and would be fully depreciated by the straight-line method over 3 years, but it would have a positive pre-tax salvage value at the end of..
|
Remained unchanged what is the bond current yield today
: Four (4) years ago the Zappa Corporation issued a 20-year, 7% annual coupon bond at a price of $1,200. If interest rates have remained unchanged what is the bond's current yield today?
|
Retained earnings to fund equity portion of capital budget
: Hatch? Corporation’s target capital structure is 40 percent? debt, 50 percent common? stock, and 10 percent preferred stock. The firm will be able to use retained earnings to fund the equity portion of its capital budget. ?
|
Monthly compounding on the money
: You want to have $20,000 for the down payment on a house in 10 years. Your parents have promised to give you $3,000 in three (3) years. How much do you need to set aside today if you can earn an 8% APR with monthly compounding on the money you save a..
|
Bonds have the same amount of risk
: Three $1000 face value, 10-year, non-callable, bonds have the same amount of risk, hence their YTMs are equal. Bond 7 has a 7% annual coupon, bond 10 has a 10% annual coupon, and bond 11 has an 11% annual coupon.
|