Investing in machine to produce computer keyboards

Assignment Help Financial Management
Reference no: EM131916242

Earp Brothers, Inc., is considering investing in a machine to produce computer keyboards. The price of the machine will be $983,000, and its economic life is five years. The machine will be fully depreciated by the straight-line method. The machine will produce 28,000 keyboards each year. The price of each keyboard will be $30 in the first year and will increase by 5 percent per year. The production cost per keyboard will be $10 in the first year and will increase by 6 percent per year. The project will have an annual fixed cost of $203,000 and require an immediate investment of $33,000 in net working capital. The corporate tax rate for the company is 39 percent. The appropriate discount rate is 14 percent.

What is the NPV of the investment?

Reference no: EM131916242

Questions Cloud

Present value of tax benefits from depreciation : Estimate the present value of the tax benefits from depreciation.
With the growing popularity of casual surf print clothing : With the growing popularity of casual surf print clothing, two recent MBA graduates decided to broaden this casual surf concept to encompass surf lifestyle
What is the stock expected price five years from today : If its required return is 12%, what is the stock's expected price 5 years from today?
Find terminal stock price using benchmark p-e ratio : In practice, another way to value stock is to value the dividends over time and then find a “terminal” stock price using a benchmark P/E ratio.
Investing in machine to produce computer keyboards : Earp Brothers, Inc., is considering investing in a machine to produce computer keyboards. What is the NPV of the investment?
What is EAC for machine : Vandalay Industries is considering the purchase of a new machine for the production of latex., what is the EAC for machine A?
Estimate universal forest-what is its required return : Since analysts estimate Universal Forest will have a 9.0 percent growth rate, what is its required return?
Sale necessary for company to pay the underwriter spread : What are the required proceeds from the sale necessary for the company to pay the underwriter's spread?
Which expansion plan should leslies choose-why : Compute the payback period, the NPV & ARR for these two plans. Which expansion plan should Leslies choose? Why?

Reviews

Write a Review

Financial Management Questions & Answers

  Sixth fourth bank has an issue of preferred stock

Sixth Fourth Bank has an issue of preferred stock with a $6.30 stated dividend that just sold for $125 per share. What is the bank’s cost of preferred stock? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 deci..

  Accrual accounting what was the companies net profit

he golden eagle appliance store sold $340000 last year their cost of goods sold was $190000, using accrual accounting what was the companies net profit?

  What is the value of ten percent annual coupon

What is the value of a 10 percent annual coupon, $1,000 par value bond with 20 years to maturity if the required rate of return on the bond is 12 percent?

  Goldrich obtained note from curtis by fraudulent means

Goldrich obtained a note from Curtis by fraudulent means. Suppose that Madson transfers the note back to Goldrich. Dicuss Curtis’s and Goldrich’s positions.

  Total cost would be allocated to assembly activity cost pool

Abagail Corp. uses activity-based costing system with three activity cost pools. How much total cost would be allocated to the Assembly activity cost pool?

  What would be the stock value of a bond

What would be the "stock" value of a bond that was convertible to 50 shares of stock if the stock was priced at 27.32? Compute the dollar amount of interest that will be earned per year for a bond listed as RKB8 3/4s15. Compute the premium price at w..

  Cost center can either minimize costs for given output

A cost center can be asked to achieve one of two typical objectives. A cost center can either minimize costs for a given output or it can:

  What was the percentage gain or loss on this investment

A sophisticated investor, B. Graham, sold 500 shares short of Amwell, Inc. at $42 a share.- What was the percentage gain or loss on this investment?

  Currency options over futures to hedge exchange rate risk

What is one advantage and one disadvantage of using currency options over futures to hedge exchange rate risk?

  Flip of a fair coin results in heads

You play a game where if the flip of a fair coin results in heads, you get $1,000; and nothing if it comes up tails. What is the expected value of the game? You’re offered $400 to not play the game. If you’re risk neutral (A=0) do you take the $400 o..

  What is the expected one year interest rate

What is the expected one year interest rate on a 1 year T-Bill in four years?

  Stock is divided between capital gains-dividend yield

Suppose you know that a company’s stock currently sells for $65.30 per share and the required return on the stock is 9 percent. You also know that the total return on the stock is evenly divided between capital gains yield and dividend yield. If the ..

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