Calculate the maximum amount , Business Economics

Tri-City Industries is considering two possible capital projects. Project A requires an initial investment of $240,000 and provides cash flows before tax of $120,000 in year one, $140,000 in year two, and $160,000 in year three. If project A is accepted, project B may be undertaken. It provides cash flows before tax of $140,000 for each of three years. However, projects A and B are partial substitutes, and the cash flows of project A will decrease by $40,000 in each of the three years if project B is also undertaken. The company's weighted average cost of capital is 13% and its tax rate is 35%. Ignore the impact of depreciation for this question.

a. What is the NPV of doing only project A? 

b. What is the maximum amount that project B can cost so that the combination of taking both projects provides the same benefit of investing only in project A?

 

 

Posted Date: 2/28/2013 6:45:13 AM | Location : United States







Related Discussions:- Calculate the maximum amount , Assignment Help, Ask Question on Calculate the maximum amount , Get Answer, Expert's Help, Calculate the maximum amount Discussions

Write discussion on Calculate the maximum amount
Your posts are moderated
Related Questions
Is dependency a problem in Less Developed Countries? Problem: DCs exploit Less Developed Countries by extracting their surplus value. This value becomes the difference among

how the concept of elasticity used for policy formulation

What are the advantages to the project manager in giving regular progress reports to the project team members? People working onto a project as to have an understanding of how

Subcontracts frequently include penalty clauses to provide the main contractor defence into the case of the supplier’s poor performance. Why are penalty clauses not the complete an

I am asking for a refund on this item #. I submitted the answers I thought were all right on this quiz and my score came back 18 right out of 30. Not happy that I am spending money

How does Structural Adjustment Programmes/Poverty Reduction Strategies assist development? Structural Adjustment Programmes (SAPs) /Poverty Reduction Strategies (PRS) are an ef

Explain how getting right price affected the market for promoting development. Getting prices right implies: • Abolishing price controls as well as subsides on fundamentals.

Ask question #Minimum 1000words accepted#

What is social exclusion? Social Exclusion: Social exclusion arises while people are denied access to goods opportunities taken as normal in a society. In several develo

a) $130,000   b) Project Atlanta has the shorter payback period Atlanta Boston Payback 1 year and 10 months 2 years an