What is the npv of the project, Econometrics

You are considering a new line of consumer products. You expect revenues of $14 million in each of the next ten years, while expenses are half of revenues (all cash flows are assumed to be at year end).The project requires an initial investment of $20 million at the beginning of the first year, which may bedepreciated for tax purposes using a straight-line depreciation over five years. The project requires workingcapital of $8 million dollars at the beginning of the first year. $5 million of the working capital is recovered atthe end of year 5, and the rest is recovered at the end of year 10. A feasibility study of the new product, whichhas already been completed, cost $3 million. The project will utilize facilities that could be rented out for $1million per year in years 1 through 10. The company's tax rate is 35 percent.

a) Calculate the after-tax operating cash flows for this project.

b) With a 10% WACC, what is the NPV of the project? Should you undertake it?

 

Posted Date: 3/16/2013 5:31:31 AM | Location : United States







Related Discussions:- What is the npv of the project, Assignment Help, Ask Question on What is the npv of the project, Get Answer, Expert's Help, What is the npv of the project Discussions

Write discussion on What is the npv of the project
Your posts are moderated
Related Questions
How to test the linear regression?

Choose Y and X variables to model on the Household and the Environment Survey 2006. Using Ox software to write a program to do estimation, and then write a report based on the an

Factor that affect the volume of production

Determine the  four  stationary  points  of  the  function  Z= 2x 3 +y 3 -18x -12y +50 according to whether they define a maximum, minimum, or saddle point.

Greenstone Coffee is experiencing financial pressures due to increased competition for its numerous urban coffee shops. Total sales revenue has dropped by 15% and the company wishe

Derive marginal benefit of reducing principal balances

Hello, I have an online economics quizzes. three quizzes each quiz 50 questions for 1.5 hour. its on R. Glenn Hubbard and Anothony Patrick O''Brien- Microeconomics, 4th Ed.I did th

Consider the study of the effect of public-sponsored training programs. As argued in public programs of training and employment are designed to improve participant's productive ski

(a) Explain what is meant by the term regression. (b) Describe the justification for the inclusion of a disturbance term in a regression analysis. (c) With appropriate exa

The following regression was estimated to explain the inflation rate in the USA.  The data set contains annual observations from 1970 to 2010.       Inft  =  2500 +   50*Xt  +