Reference no: EM13492078
ABC Ltd. is analyzing the possibility of introducing a new product. ABC Ltd. estimates that developing this product will require up-front capital expenditures of $10 million. These costs will be depreciated on a straight-line basis for five years. ABC Ltd. believes that it can sell the product initially for $260. The selling price will increase to $270 in years 2 and 3 before falling to $255 and $245 in years 4 and 5, respectively. After five years the company will withdraw the product from the market and replace it with something else. Variable costs are $140 per unit. ABC Ltd. forecasts sales volume of 20,000 units the first year, with subsequent increases of 25 percent (year 2), 20 percent (year 3), 20 percent (year 4), and 15 percent (year 5). Offering this product will force ABC Ltd. to make additional investments in receivables and inventory. Projected end-of-year balances appear in the following table. Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Accounts receivable $0 $200,000 $250,000 $300,000 $150,000 $0 Inventory 0 500,000 650,000 780,000 600,000 0 The firm faces a tax rate of 40 percent. Assume that cash flows arrive at the end of each year, except for the initial $10 million outlay.
Required:
a. Calculate the project's contribution to net income each year.
b. Calculate the project's cash flows each year.
c. Calculate two NPVs, one using a 10 percent discount rate and one using a 15 percent discount rate.
|
Calculate the accounts receivable turnover
: What additional information is provided in the notes concerning revenue recognition, uncollectible accounts, and the company's inventory costing method?
|
|
What is the tension between the second and third cars
: A subway train has three cars, each weighing 1.20 x 105 N. The frictional force on each car is 103 N, and the first car, acting as an engine, What is the tension between the second and third cars
|
|
What predominant wavelength of visible light do you see
: A tanker ship spills oil (n=1.40) into the sea. Looking at this disaster from a helicopter overhead, what predominant wavelength of visible light do you see if the oil is 390nm thick
|
|
Determine the distance between the two dark fringes
: Light of wavelength 589 nm is incident on a single slit that is 0.720mm wide, and the resulting diffraction pattern is observed on a screen 2.00m away. What is the distance between the two dark fringes on either side of the central bright fringe
|
|
Calculate the projects contribution to net income
: Calculate the projects contribution to net income each year, calculate the project's cash flows each year
|
|
What is the beat frequency she hears
: A scientist is running at speed, u, toward a large, smooth wall while holding a tuning fork that vibrates at frequency, f. what is the beat frequency she hears
|
|
Make the necessary adjusted journal entries
: Create the Journal for the transactions and Post these to the T-accounts, create the Unadjusted trial balance and make the necessary Adjusted journal entries
|
|
Create an e-r diagram with maximum cardinalities
: Create an E-R diagram with maximum cardinalities for the shipping of inventory to customers. Show this diagram as an REA model identifying resources, events, and agents.
|
|
Find the minimum force required to move the box down ramp
: A box weighing 600 N is at rest on a ramp at an angle of 32.5o with the horizontal. Find the minimum force required to move the box down the ramp
|