Compute the npv and irr for the project

Assignment Help Financial Management

Reference no: EM132040885

Suppose Amazon has decided to introduce the Echo III. Before they launch the Echo III, they conducted an analysis to see if the Echo II would be a desirable investment. The company estimated that it would sell 10 million Echo IIIs per year at a price of $250 for the next six years. The initial capital outlay is determined to be $1.25 billion and a $600 million outlay in net working capital would also be required. Assume that the equipment used will be depreciated using the MACRS 7 year schedule and that the equipment has a salvage value of zero. At the end of year 6, the equipment will be sold for its book value. Also, assume that that the tax rate is 25%.

2) If the cost of capital is 12%, compute the NPV and IRR for the project. Test the sensitivity of NPV to changes in the cost of capital by increasing the WACC by 1%.

Reference no: EM132040885

Questions Cloud

Describe the purpose of your applied research study : List the research questions that will guide your study. These are questions that must be answered to evaluate the problem or propose a solution.

Research the sarbanes oxley act : You will need to research the Sarbanes Oxley Act. You must provide references in the Assignment. You will need to create a PowerPoint® presentation.

Evaluate new product line for markum enterprises : You are a consultant who has been hired to evaluate a new product line for Markum Enterprises.

Explain the character and values you possess : How has your previous education and/or work experience prepared you for doctoral studies at Liberty University?

Compute the npv and irr for the project : If the cost of capital is 12%, compute the NPV and IRR for the project.

What would be your estimate of intrinsic value : On August 1, 1998, Georgina Comer, CFO of Globalcom Inc. was meeting with the team of investment bankers who were helping Globalcom issue bonds worth.

Compute the out-of-sample performance of your predictors : Compute the out-of-sample performance of your predictors by computing the MSE for prediction on test sample. Calculate the 95% confidence intervals for MSE

Normal population with mean u and a standard : A random sample size of 41 is produced from a normal population with mean u and a standardd deviation sigma = 1. Let X(estimated) = (i=1E40 Xi)/40

The definition and history of applied research : Explain how the author(s) used the results to improve or change the environment studied.

User Account

All Pages