Reduce the expected npv and/or irr of a project

Assignment Help Financial Management
Reference no: EM132038105

ABANDONMENT OPTION The Sorensen Supplies Company recently purchased a new delivery truck. The new truck costs $22,500, and it is expected to generate after-tax cash flows, including depreciation, of $5,875 per year. The truck has a 5-year expected life. The expected year-end abandonment values (salvage values after tax adjustments) for the truck are given below. The company's WACC is 9%. Year Annual After-Tax Cash Flow Abandonment Value 0 ($22,500) - 1 5,875 $17,000 2 5,875 15,000 3 5,875 9,000 4 5,875 4,750 5 5,875 0 a. What is the truck's optimal economic life? year(s) b. Would the introduction of abandonment values, in addition to operating cash flows, ever reduce the expected NPV and/or IRR of a project?

Reference no: EM132038105

Questions Cloud

High quality backpacks to be marketed to college professors : XYZ leather company is considering a project to make high quality backpacks to be marketed to college professors.
How should the ranges vary by job type and level : Recommend a specific compensation mission statement and the specific objectives of the MPBS compensation system that aligns the compensation plan.
What is the project cash flow for first year : What is the project's cash flow for the first year (t = 1)?
Characteristics of the ideal organization : What are 5 most important characteristics of the ideal organization that you would like to be a part of, and why?
Reduce the expected npv and/or irr of a project : Would the introduction of abandonment values, in addition to operating cash flows, ever reduce the expected NPV and/or IRR of a project?
Compute the sales level in number of soccer balls : In October 2014, Saldanha Sports Company sold soccer balls to its distributors for $18 each. Compute the sales level in number of soccer balls
Define case related to performance management : Elaborate on two key learnings from the case related to performance management, appraisals, and the validity and reliable of various methods.
Importance of social media-videoconferencing in organization : An article in the Wall Street Journal (3/25/14) points out that with the importance of social media and videoconferencing in organizations
What is the firm after-tax component cost of debt : What is the firm's after-tax component cost of debt for purposes of calculating the WACC?

Reviews

Write a Review

Financial Management Questions & Answers

  Foreign company acquisition

Acquisition by a foreign company and the effects of that decision and the results of foreign exchange in Euro and the exchange rate differences.

  Financial management for profit and non profit organizations

In this essay, we are going to discuss the issues of financial management in a non-profit organisation.

  Method for estimating a venture''s value

Evaluate venture's present value, cash and surplus cash and basic venture capital.

  Replacement analysis

This document show the Replacement Analysis of modling machine. Is replacement give profit to company or not?

  Business finance task - capital budgeting

Your company is considering using the payback period for capital-budgeting. Discuss the advantages and disadvantages of this technique.

  Analysis of the investment

In this project, you will focus on one of these: the additional cost resulting from the purchase of an apple press (a piece of equipment required to manufacture apple juice).

  Conduct a what-if analysis

Review the readings and media for this unit, including the Anthony's Orchard case study media. Familiarise yourself with the Anthony's Orchard company and its current situation.

  Determine operational expenditures

Organisations' behaviour is guided by financial data. In the short term, such data will help determine operational expenditures; in the long term, historical data may help generate forecasts aimed at determining strategic plans. In both instances.

  Personal financial management

How much will you have left over each half year if you adopt the latter course of action?

  Sources of finance for expansion into new foreign markets

A quoted company is considering several long-term sources of finance for expansion into new foreign markets.

  Long term financial planning

This assignment is designed for analyze Long term financial planning begins with the sales forecast and the key input in the long term fincial planning.

  Explain the role of fincial manager

This assignment explain the role of fincial manager, function of manger. And what are the motives of financial manager.

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