Does the project make sense at a discount rate

Assignment Help Financial Management
Reference no: EM131022536

Suppose a project costs 200,000 today, 100,000 next year and 15000 to dispose of it in ten years when the project is discontinued. Once finished three years from today, it is expected to generate a net income of 40000 per year until it is discontinued. Does the project make sense at a discount rate of 2%?

Reference no: EM131022536

Questions Cloud

What would total recruiting cost be for chester next year : Chester's turnover rate for this year is 6.29%. This rate is projected to remain the same next year and no further downsizing will occur from automating. Chester plans to spend an additional $500 beyond the extra amount above the $1000 recruiting bas..
When computing the net present value of a capital project : Which one of these is a requirement when computing the net present value of a capital project?
Used when evaluating the addition of the lower-priced shoes : Walks Softly sells customized shoes. Currently, it sells 16,000 pairs of shoes annually at an average price of $68 a pair. The company is considering adding a lower-priced line of shoes that will sell for $39 a pair. Walks Softly estimates it can sel..
What were flotation costs as fraction of funds raised : Moonscape has just completed an initial public offering. The firm sold 4 million shares at an offer price of $10 per share. The underwriting spread was $.60 a share. The price of the stock closed at $14 per share at the end of the first day of tradin..
Does the project make sense at a discount rate : Suppose a project costs 200,000 today, 100,000 next year and 15000 to dispose of it in ten years when the project is discontinued. Once finished three years from today, it is expected to generate a net income of 40000 per year until it is discontinue..
The warehouse is debt-free : Wexter's purchased a warehouse for $499,000 six years ago. Four years ago, repairs costing $132,000 were made to the building. The annual property taxes are $41,000. The warehouse has a current book value of $268,000 and a market value of $529,000. T..
What is the net benefit of a project to remove the dam : There is a proposal to remove a hydro dam in the state of Washington. The cost to the government of removing is the loss of $5,000,000 per year in profits from the sale of electricity for the next seven years. If the dam is removed, the salmon fisher..
What is the current yield on bond-value or cost of the bond : A bond has a coupon rate of 5.375%, pays coupons semiannually, and has a maturity of 5 years. If the yield to maturity is 5.80%, calculate the current cost of a bond with a par value of $1000. What is the current yield on the bond? Assume that one ye..
What is the beta of your portfolio : You own 500 shares of Stock A at a price of $70 per share, 485 shares of Stock B at $90 per share, and 850 shares of Stock C at $43 per share. The betas for the stocks are .6, 1.4, and .8, respectively. What is the beta of your portfolio?

Reviews

Write a Review

Financial Management Questions & Answers

  What is the expected profit of granting credit

On each no delinquent sale Cast Iron receives revenues with a present value of $1,360 and incurs costs with a present value of $1,210. Assume there is no possibility of repeat orders and that the probability of successful collection from the customer..

  Principal amount for treasury inflation-protected security

Compute the annual interest payments and principal amount for a Treasury Inflation-Protected Security with a par value of $1,000 and a 3-percent interest rate if inflation is 4 percent in year 1, 5 percent in year 2, and 6 percent in year 3.

  Find amount by which sinking fund is short of repaying loan

Alan borrows 18000 for eight years and agrees to make quarterly payments of 770. Each of these payments consists of interest for the just completed quarter and a deposit to a sinking fund that has a nominal interest rate of 6% convertible quarterly. ..

  Expectations theory of the term structure of interest rates

According to the expectations theory of the term structure of interest rates,

  Program for student athletes in the department of athletics

Paul wants to donate the funds to establish a new academic support program for student athletes in the Department of Athletics. Specifically, he is prepared to donate $10 million today (Feb. 12, 2015), $10 million one year hence (Feb. 12, 2016), and ..

  Calculate a table of interest rates

Calculate a table of interest rates for 5 years based on the following information:

  The transaction is called going public

When stock in a closely held corporation is offered to the public for the first time, the transaction is called “going public,” and the market for such stock is called the new issue market. It is possible for a firm to go public and yet not raise any..

  Find the yield rate for the lender

A $1000 loan over a 10-year period earns an effective rate of interest of 9% per annum. Interest is paid each year as accrued and the principal is repaid at the end of ten years. If the repayments to the lender are reinvested at 7%, find the yield ra..

  What is the estimated value of each share of stock

The PV of XYZ Corp.'s future operating free-cash flow is $500 million. It has debt outstanding of $30 million and cash and marketable securities of $10 million. It also owns an undeveloped tract of land recently appraised for $8 million. There are 5 ..

  What is the IRR of the Wheel Deal expansion

The Wheel Deal Inc., a company that produces scooters and other wheeled non-motorized recreational equipment is considering an expansion of their product line to Europe. The expansion would require a purchase of equipment with a price of €1,200,000 a..

  Pricing one year loan with nonzero recovery

A borrower has a 5% chance of default on a $100 loan; If default occurs, the bank gets $60 back in principal and no interest; The bank sets the rate on the loan expecting 6% (3% inflation + 3% real) What is the interest rate the bank charges this bor..

  What is the target variable cost per mouse

A company believes it can sell 5,600,000 of its proposed new optical mouse at a price of $10.00 each. There will be $8,000,000 in fixed costs associated with the mouse. If the company desires to make a profit $2,000,000 on the mouse, what is the targ..

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