Considering a project with an initial fixed asset cost

Assignment Help Financial Management
Reference no: EM13908856

Gateway Communications is considering a project with an initial fixed asset cost of $2.46 million which will be depreciated straight-line over the 10-year life of the project. At the end of the project the equipment will be sold for an estimated salvage of $300,000. The project will not directly produce any sales but will reduce operating costs by $725,000 a year. The tax rate is 35 percent. The project will require $45,000 of inventory which will be recouped when the project ends. Should this project be implemented if the firm requires a 20 percent rate of return? Why or why not? a. No; The NPV is -$224,937.49 b. No; The NPV is -$156,627.21 c. Yes; The NPV is $251,860.34 d. Yes; The NPV is $387,516.67 e. Yes; The NPV is $466,940.57 please show me the steps. 

Reference no: EM13908856

Questions Cloud

Implement a multiple login page : Implementing a twitter web system in ruby so what i need from you are to implement a multiple login page, because the login page on it atm only allows for one login id.
What should be the price of portage bay stock : Portage Bay Enterprise has $2 million in excess cash, no debt, and is expected to have free cash flow of $12 million next year. Its FCF is then expected to grow at a rate of 3% per year forever. If Portage Bay's equity cost of capital is 10% and it h..
Show that the distribution of inter-renewal intervals : Assume that the distribution of inter-renewal intervals for one state j is arithmetic with span d. Show that the distribution of inter-renewal intervals for all states is arithmetic with the same span.
Explain history of your airline and describe its economic : Explain the history of your airline and describe its economic, structural, and competitive characteristics pre and post deregulation. Identify the various route structure and product alternatives, the costs and benefits of each, and means for achi..
Considering a project with an initial fixed asset cost : Gateway Communications is considering a project with an initial fixed asset cost of $2.46 million which will be depreciated straight-line over the 10-year life of the project. At the end of the project the equipment will be sold for an estimated salv..
What is meant by moving up the economic value chain : Please visit website http://www.aicpa.org for research help explain the CPA Vision Project in a paragraph. What is meant by "moving up the economic value chain," and how are CPAs going to accomplish this?
Standard deviation of asset-portfolio standard deviation : The standard deviation of asset x is 10%. The standard deviation of asset Y is 32%. the correlation between the returns of X and Y is 32%. If you have a portfolio invested equally in X and Y, the portfolio standard deviation is? Please show me how to..
Have you ever used office resources for personal tasks : What kinds of risks does a firm like Amazon.com face with respect to safeguarding its assets? What types of controls do you think it already has in place to minimize these risks? Go to the firm's website and click on "Investor Relations".
Investment account and beginning retained earnings : On January 1, 2009 Herbert acquired all of the outstanding stock of Rambis for $500,000. Annual excess amortization of $20,000 resulted from this acquisition. what is the adjustment to Herbert’s Investment account and beginning Retained Earnings. wha..

Reviews

Write a Review

Financial Management Questions & Answers

  A stock index with a dividend yield of 22nbsp per

a stock index with a dividend yield of 2.2nbsp per annum with continuous compounding is currently standing

  Calculate variances and standard deviations

The rate of return on Cherry Jalopies, Inc., stock over the last five years was 23 percent, 11 percent, -5 percent, 7 percent, and 10 percent. Over the same period, the return on Straw Construction Company’s stock was 16 percent, 24 percent, -6 perce..

  Find the actual interest rate paid by treasury

A six month $47,000 Treasury bill with a discount rate of 3.717% was sold in 2009. Find the Price of the Bill. Actual interest rate paid by treasury.

  What are the all-in costs of bond

10- year fixed-rate subordinated Eurodollar bond at par with an annual coupon of 107/8% and front-end fees of 2.0%. What are the all-in costs of bond?

  Find out the price of equity shares

Find out the price of equity shares using Walter's and Gordon's payout - details relating to three companies which are the identical

  Planning for retirement

How much money will Tom and Tricia have in 45 years if they do nothing for the next 10 years, then puts $2400 per year away for the remaining 35 years? How much money will Tom and Tricia have in 45 years if they put $2400 per year away for the next 1..

  Distribution of possible returns-standard deviation

You are going to invest all of your funds in one of three projects with the following distribution of possible returns:

  Bondholders to convert their debt to equity of the company

Why does a bankrupt firm under Chapter 11 generally require its bondholders to convert their debt to equity of the company after the reorganization?

  Short-term financing-what is the firms interest payment

Goniff Steel has $24,000 in assets, consisting of $1,000,000 of temporary current assets, $2,000,000 of permanent current assets, and $1,200,000 of fixed assets. Short-term interest rates are 8% and long-term interest rates are 12%. If long-term fina..

  What is the average accounts payable for APP

A chain of appliance stores, APP Corporation, purchases inventory with a net price of $750,000 each day. The company purchases the inventory under the credit terms of 1/15, net 35. APP always takes the discount, but takes the full 15 days to pay its ..

  What must the expected return on market

A stock has an expected return of 10.3 percent, its beta is 1.02, and the risk-free rate is 6.35 percent. What must the expected return on the market be?

  Observe that a company has entered into futures contracts

You observe that a company has entered into futures contracts where the company is obligated to sell more of the commodity it produces than the volume they actually expect to produce. How might this be justified? What if instead you observed that a c..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd