What is the net present value of this project

Assignment Help Financial Management
Reference no: EM13938354

Gateway Communications is considering a project with an initial fixed asset cost of $2.46 million which will be depreciated straight-line to a zero book value over the 10-year life of the project. At the end of the project the equipment is scrapped. The project will increase pre-tax revenues to the firm by $725,000 a year. The tax rate is 35 percent. If the firm requires a 14 percent rate of return what is the Net Present Value of this project?

The NPV is -$172,937.49.

The NPV is $387,516.67

The NPV is $251,860.34

The NPV is -$87,820.48.

The NPV is $447,202.05

Reference no: EM13938354

Questions Cloud

What-if analysis and problem optimisation : Perform a what-if analysis to determine the maximum total profit that could be achieved if only rye (no wheat) is planted, given the cost and time constraints.
Statement that declares and stores the elements : Write a statement that declares and stores the elements of the following array into a vector object:
Project is an extension of the firms current operations : Antonio's is analyzing a project with an initial cost of $42,000 and cash inflows of $26,000 a year for 2 years. This project is an extension of the firm's current operations and thus is equally as risky as the current firm. The firm uses only debt a..
Take public transportation : When you drive, rather than walk or take public transportation, you incur social costs such as ________. Painting the outside of your house and planting a garden in your front yard are _________ to your neighbors. The invisible hand is generally asso..
What is the net present value of this project : Gateway Communications is considering a project with an initial fixed asset cost of $2.46 million which will be depreciated straight-line to a zero book value over the 10-year life of the project. At the end of the project the equipment is scrapped. ..
Articulate the meaning of value-added service : 1. Articulate the meaning of value-added service as it pertains to patient care services, and argue the major reasons why it matters to add value to patient services. Justify your response.
What is your estimate of the contribution margin ratio : Assume that the selling price per ticket is $25.Based on your answer to part a, what is your estimate of the contribution margin ratio at Madrigal Theater?
Investigating two mutually exclusive investment projects : As a financial analyst for a large firm you are investigating two mutually exclusive investment projects for the firm, project A and project B. After your analysis you find that the IRRA>IRRB, but that the NPVA
Business problem statement : The table of contents for the Course Project proposal: Subject of Course Project Business problem statement Name of the company or organization

Reviews

Write a Review

Financial Management Questions & Answers

  Compute the direct materials price and quantity variances

Compute the direct materials price and quantity variances. Compute the direct labor rate and efficiency variances. Compute the variable manufacturing overhead rate and efficiency variances.

  Q1 an s corporation is subject to the following taxa

q1. an s corporation is subject to the following tax.a. corporate income tax. b. built-in gains tax. c. accumulated

  Expected return-overvalued or undervalued

Stock Y has a beta of 1.6 and an expected return of 16.6 percent. Stock Z has a beta of 0.8 and an expected return of 9.4 percent. If the risk-free rate is 5.1 percent and the market risk premium is 6.6 percent, the reward-to-risk ratios for stocks Y..

  Self-employed certified public accountant

Income statement preparation On December 31, 2015, Cathy Chen, a self-employed certified public accountant (CPA), completed her first full year in business. During the year, she billed $360,000 for her accounting services. She had two employees, a bo..

  Diversification occurs when stocks with low correlations

Diversification occurs when stocks with low correlations of returns are placed together in a portfolio. Identify at least one type of firm that might exhibit low correlations of returns with the overall stock market? Explain why the correlations of t..

  The incremental value of the acquisition

Taylor's Hardware is acquiring The Corner Store for $50,000 in cash. Taylor's has 2,400 shares of stock outstanding at a market value of $20 a share. The Corner Store has 1,200 shares of stock outstanding at a market price of $24 a share. Neither fir..

  Calculate the tax disadvantage to organizing

Calculate the tax disadvantage to organizing a U.S. business today as a corporation, as a compared to a partnership, under the following conditions. Assume that all earnings will be paid out as cash dividends.

  What is the effective annual cost of trade credit under term

Pet Store Inc. sells on terms of 2/10, net 50. What is the effective annual cost of trade credit under these terms? Use a 365-day year. Please show formula and explain step by step. I've tried other formulas on here and continue to get the wrong answ..

  What is the firms after-tax component cost of debt

A company's 7% coupon rate, semiannual payment, $1,000 par value bond that matures in 25 years sells at a price of $733.23. The company's federal-plus-state tax rate is 30%. What is the firm's after-tax component cost of debt for purposes of calculat..

  Securities are categorized as trading securities

In 2016, a company purchases securities at a cost of $225,000. Their year-end value is $237,500. In 2017, these securities are sold for $230,000 and new securities are purchased for $305,000. At the end of 2017, the securities have not yet been sold,..

  What is cost of capital to the firm for preferred stock

Your firm is planning to issue preferred stock. The stock is expected to sell for $98.91 a share and will have a $100 par value on which the firm will pay a 14.3% dividend. What is the cost of capital to the firm for the preferred stock?

  Beta and required rate of return

A stock has a required return of 11%; the risk-free rate is 2.5%; and the market risk premium is 6%. What is the stock's beta? If the market risk premium increased to 10%, what would happen to the stock's required rate of return? Assume the risk-free..

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