Calculate the net present value, Financial Management

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: 2/15/2013 7:23:12 AM | Location : United States







Related Discussions:- Calculate the net present value, Assignment Help, Ask Question on Calculate the net present value, Get Answer, Expert's Help, Calculate the net present value Discussions

Write discussion on Calculate the net present value
Your posts are moderated
Related Questions
Explain the risk-return relationship. The relationship among risk and required rate of return is known as the risk-return relationship.  It is a positive relationship for the r

Diversification A  strategy  which tends to move  into  new  products  and  new  markets  in  which  organisation is unfamiliar with. Related for example vertical forwar

Lincoln Park Zoo in Chicago is considering a renovation that will improve some physical facilities at a cost of $1,800,000. Addition of new species will cost another $310,000. Addi

Do you guys provide Efficient Cash Management assignment help? I need writing a report on Efficient Cash Management.

In how many area ratios are grouped Ratios can be grouped into 3 main areas: 1 Performance - how well business has done (profitability) 2 Position - short term standing

What is the Modigliani-Miller's irrelevance hypothesis in dividend decision making? Critically evaluate its assumption.

Revenue Recognition or Realisation The resources of business are utilized to earn revenue through sale of goods or rendering of services.The American Accounting Association d

What are the primary reasons that companies hold cash? Companies hold cash to make essential payments, to take benefit of opportunities as they arise, and to cover unforeseen eme

Deferred coupon bonds are generally issued at a discount price and are used for financing leveraged buyouts. The coupon payment on these types o

Dividend cover Dividend cover measures the relationship among earnings per share and net dividends per share. The higher the altitude of dividends for any given level of EPS t