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

Ask an Expert

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

Write your message here..

Related Questions

MULTI REGRESSION, HOW CAN I GET MULTI REGRESSION HOW CAN I GET MULTI REGRESSION

Technical and economic efficiency, What''s the relationship between economi... What''s the relationship between economic efficiency and technical efficiency

Econometric project assistance needed, HI, I am currently working on my eco... HI, I am currently working on my econometrics assignment which requires me to replicate the result of a published paper. I have been given the same data set as the paper therefore

Demand=price, expected solution plus hypothesis expected solution plus hypothesis

Explain the term volatility clustering, Problem: (a) Write down the equ... Problem: (a) Write down the equation for symmetric GARCH and clearly explain its components. (b) Explain the term ‘volatility clustering'. (c) How would you model leverag

I need a help with my assignment, My econometrics assignment is due for mon... My econometrics assignment is due for monday, August 18th. I''m running out of time and need a help to meet the deadline. I need answers for 4 problems from the basic econometrics.

Human Resources Management, Effective Human Resources Management Depends Up... Effective Human Resources Management Depends Upon Sound Reward System Essays and Term Papers

Cournot duopoly model, i) Briefly distinguish between the Cournot duopoly m... i) Briefly distinguish between the Cournot duopoly model and that of Stackelberg.     ii) Suppose the  inverse  market demand curve for  a telecommunications equipment is P = 10

Replication of the work of a published paper, Hi I am currently working on ... Hi I am currently working on my econometrics coursework which is to replicate a published paper. I was given the same data set as the paper and suppose to get the same answer as th

Plot the appropriate short run and revenue curves, Plot the appropriate sho... Plot the appropriate short run and revenue curves ( you may need more than one diagram, and tables) to determine at which price and output levels "Draw Ltd", would achieve: