Determine the npv and irr of the project

Assignment Help Corporate Finance
Reference no: EM131546611

Assignment

In this assignment, you will undertake calculations in order to evaluate a project, and decide if it should be accepted or rejected.

Texas Roks, Inc. is considering a new quarry machine. The costs and revenues associated with the machine have been provided to you for analysis:

Cost of the new project

$4,000,000

Installation costs

$100,000

Estimated unit sales in year 1

50,000

Estimated unit sales in year 2

75,000

Estimated unit sales in year 3

40,000

Estimated sales price in year 1

$150

Estimated sales price in year 2

$175

Estimated sales price in year 3

$160

Variable cost per unit

$120

Annual fixed cost

$50,000

Additional working capital needed

$435,000

Depreciation method

3 years straight-line method, no salvage value

Texas Rok's tax rate

40%

Texas Rok's cost of capital

13%

Required:

1. Calculate operating cash flow and the change in net working capital.
2. Determine the NPV and IRR of the project.
3. Should the company accept or reject the project based on the NPV? Why?
4. Should the company accept or reject the project based on the IRR? Why?
5. What is your final accept or reject decision? Why?
6. What is the payback period for this project? Would this influence your decision to accept or reject?

Reference no: EM131546611

Questions Cloud

What is the role of place and the associated objects : The relevance of this place and these objects in contemporary culture, What significance do these places or things hold in the minds and emotions of the people?
Cell reproduction to understand cancer : Please provide a position as to why we need to study the cell's reproduction to understand cancer and its treatments.
Process such as earthquakes : Planet Earth has many processes that affect the surface where we live. Choose a process such as earthquakes, volcanoes, plate tectonics
Corporate valuation-what is the stock value per share : Scampini Technologies is expected to generate $75 million in free cash flow next year, what is the stock's value per share?
Determine the npv and irr of the project : Determine the NPV and IRR of the project. Should the company accept or reject the project based on the NPV? Why? What is your final accept or reject decision?
Importance of carbohydrate in a number of facets : You have learned about the importance of carbohydrate in a number of facets. Carbohydrate can serve as energy for the brain, storage energy for the muscles
Describes the theory or work aligned to the chosen theorist : Write a paper that describes the theory or work aligned to the chosen theorist and provide three reasons why you chose this theorist.
Reproduction took place for four generations using diploid : What would a diagram of what would happen if sexual reproduction took place for four generations using diploid (2n) cells look like?
Quantitative problem-what is the firm after-tax cost of debt : If the firm's marginal tax rate is 40%, what is the firm's after-tax cost of debt?

Reviews

Write a Review

Corporate Finance Questions & Answers

  Impact of the global economic crisis on business environment

This paper reviews the article of ‘the impact of the global economic crisis on the business environment' that is written by Roman & Sargu (2011).

  Explain the short and the long-run effects on real output

Explain the short and the long-run effects on real output, price, and unemployment

  Examine the requirements for measuring assets

Examine the needs for measuring assets at fair value in accounting standards

  Financial analysis report driven by rigorous ratio analysis

Financial analysis report driven by rigorous ratio analysis

  Calculate the value of the merged company

Calculate the value of the merged company, the gains (losses) to each group of shareholders, NPV of the deal under different payment methods. Synergy remains the same regardless of payment method.

  Stock market project

Select five companies for the purpose of tracking the stock market, preparing research on the companies, and preparing company reports.

  Write paper on financial analysis and business analysis

Write paper on financial analysis and business analysis

  Intermediate finance

Presence of the taxes increase or decrease the value of the firm

  Average price-earnings ratio

What is the value per share of the company's stock

  Determine the financial consequences

Show by calculation the net present value for the three alternatives (no education, network design certification, mba). Also, according to NPV suggest which alternative you advise your friend to choose

  Prepare a spread sheet model

Prepare a spread sheet model for the client that determines NPV/IRR with and without tax.

  Principles and tools for financial decision-making

Principles and tools for financial decision-making. Analyse the concept of corporate capital structure and compute cost of capital.

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