Considered is to manufacture unique case for smartphones

Assignment Help Financial Management

Reference no: EM131978269

The project being considered is to manufacture a unique case for smartphones. The following are the final values to the data that you have been estimating up to this point:

- You can borrow funds from your bank at 3%.

- The cost to install the needed equipment will be $105,000 and this cost is incurred prior to any cash is received by the project.

- Your tax rate is 30% and you plan to depreciate the equipment on a straight-line basis for the life of the equipment.?

- The gross revenues from the project will be $25,000 for year 1, then $27,000 for years 2 and 3. Year 4 will be $28,000 and year 5 (the last year of the project) will be $23,000.

- The expected annual cash outflows (current project costs) are estimated at being $13,000 for the first year, then $12,000 for years 2, 3, and 4. The final year costs will be $10,000.

- After 5 years the equipment will stop working and will have a residual (salvage) value of $5,000).

- The discount rate you are assuming is now 7%.

The Tasks:

1. Perform the final NPV calculations and provide a narrative of how you calculated the computations and why.

2. Then provide a summary conclusion on whether you should continue to pursue this business opportunity.

Reference no: EM131978269

Questions Cloud

Increasing concern among american criminologists : Review "Mass Shootings in America: Moving Beyond Newtown" and analyze the myths versus reality of what we know to be true about this particular type

What is his realized yield on bonds : If he sells these bonds, for which he paid the face value of $1,000, at the current price of $812.16, what is his realized yield on the bonds?

Increasing concern among american criminologists : Mass shootings have become an increasing concern among American criminologists.

What could the manager have done differently : Describe the potential causes of this scenario - What could the manager have done differently - When it was time to have the in-person conversation

Considered is to manufacture unique case for smartphones : The project being considered is to manufacture a unique case for smartphones.

Transition that a person must go through : In your opinion, what is the toughest life transition that a person must go through? What about it makes it tough?

Genetic testing of people : What about pre-natal testing when the pregnancy has already started?

Prototypic dimensions of parenting : Based on the four prototypic dimensions of parenting, which type of style do you believe best suits you or your parent's approach?

What is next year dividend payment if the required rate : What is next year’s dividend payment if the required rate of return is 15 percent?

User Account

All Pages