Salvage value-what is the net present value of the asset

Assignment Help Financial Management
Reference no: EM13938084

Management is considering purchasing an asset for $50,000 that would have a useful life of 5 years and no salvage value. For tax purposes, the entire original cost of the asset would be depreciated over 5 years using the straight-line method. The asset would generate annual net cash inflows of $20,000 throughout its useful life. The project would require additional working capital of $7,000, which would be released at the end of the project. The company's tax rate is 30% and its discount rate is 13%.

Required:

What is the net present value of the asset?

Reference no: EM13938084

Questions Cloud

Prepare the amortization table using effective interest rate : Thornwood Lanes bought a service vehicle for $25,000 by issuing a 6 percent installment note on December 31, 2009. Prepare the amortization table using the effective interest rate method.
How would animal life be affected by this atmospheric change : How would the composition of the earth's atmosphere change if green plants and other autotrophs disappeared? Explain why in term of your knowledge of photosynthesis.
Excel file for further analysis : Then after naming each test on the program, the test was executed. After the test was completed, the data obtained was exported to an excel file for further analysis.
Implement the default constructor with one parameter : Complete and test this exercise. Implement the default constructor and the constructor with one int parameter. Overload the + and - operators to add and subtract percents. Also, overload the * operator to allow multiplication of a percent by an in..
Salvage value-what is the net present value of the asset : Management is considering purchasing an asset for $50,000 that would have a useful life of 5 years and no salvage value. For tax purposes, the entire original cost of the asset would be depreciated over 5 years using the straight-line method. What is..
Reactions by giving the major products : A solution containing 0.96 g of 2-bromooctane in 10 mL ether solution gave an observed rotation of -1.8° in a 10 cm cell at 20 °C. Calculate the specific rotation of this solution.
How much of the first payment is interest expense : If the monthly payment is $2,571.53, how much of the first payment is interest expense and how much is principal repayment?
Capital structure weight of equity on market value basis : Filer Manufacturing has 10.6 million shares of common stock outstanding. The current share price is $52, and the book value per share is $6. Filer Manufacturing also has two bond issues outstanding. What is Filer's capital structure weight of equity ..
Provide the journal entry to record the acquisition : Would Southern Aircraft record the lease as an operating or capital lease? Why? Provide the journal entry to record the acquisition.

Reviews

Write a Review

Financial Management Questions & Answers

  How much will you save in interest by making extra payments

Suppose you take out a 30 year mortgage for $ 175000 at 9% interest. The monthly payments on this loan are $ 1408.09. If you pay an extra 10% per month on your mortgage, how soon will you pay off the loan? How much will you save in interest by making..

  Calculate and answer what the bond is worth

A company issued a bond with the following conditions: Sales price = SEK 1000, strike price = 1100 SEK , coupon = 80 and the number of outstanding year for the bond is 10. Calculate and answer what the bond is worth.

  Average length of the firms short-term operating cycle

Pretty Lady Cosmetic Products have an average production process time of forty days. Finished goods are kept on hand for an average of fifteen days before they are sold. Accounts receivable are outstanding an average of thirty-five days,, and the fir..

  The after tax amount of the dividend

Firm A paid an end of year dividend of $3.75. For corporate investors with a tax rate of 35% and an exclusion rate of 70%, the after tax amount of the dividend is:

  Generates after-tax cash flows

An Investment of $83 generates after-tax cash flows of $46 in year one, $70.00 in year 2, and 135.00 in year 3. The required rate of return is 20 percent. The net value is what?

  Bond valuation and what is their nominal yield to maturity

Nungesser Corporation's outstanding bonds have a $1,000 par value, a 11% semi-annual coupon, 7 years to maturity, and an 10.5% YTM. What is the bond's price? Round your answer to the nearest cent

  Considering buying security that makes annual payments

You are considering buying a security that makes annual payments (to you) that grow by 1% per year forever, with the first payment made one year from today and in the amount of $2. Your required return is 6% per year for this security. How much shoul..

  Knowledgeable regarding computers

Ahmed, who is very knowledgeable regarding computers, agrees to purchase computers for Khaled's business. Ahmed is retained at Khaled’s business for that purpose only, he is paid a set rate for the job, and Khaled exercised no control over the manner..

  What must expected return on this stock

A stock has a beta of 1.24, the expected return on the market is 11.8 percent, and the risk-free rate is 4.55 percent. What must the expected return on this stock be?

  Explain what factors are contributing to the success or lack

What kind of a merger was it? How well is it working from the perspectives of the various stockholders? As far as you are able to determine, what factors are contributing to the success or lack of it?

  Tax on dividend income alone generally amounts

A corporation receives 35,000 in dividend income If it is in the 34% marginal bracket, the tax on the dividend income alone generally amounts to

  Determine the conventional B-C ratio

The cost of building Runyang Bridge in China, the world's third longest suspension bridge, was approximately $5 million. The indefinite upkeep costs are estimated to be $403,777 per year. Annual benefits of $340,000 and annual disbenefits of $41,000 ..

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