The net present value criterion

Assignment Help Corporate Finance
Reference no: EM1345604

A company is planning to invest $75,000 (before taxes) in a personnel training program. The $75000 outlay will be charged off as an expense by the firm this year (Year 0). The returns estimated from the program in the forms of greater productivity and less employee turnover are as follows (on an after-tax basis):

Years 1-10: $7,500 per year
Years 11-20: $22,500 per year

The company has estimated its cost of capital to be 15%. Assume that the entire $75,000 is paid at time zero (the beginning of the project). The marginal tax rate for the firm is 40%. Based on the net present value criterion, should the firm undertake the training program?

 

Reference no: EM1345604

Questions Cloud

Computing the monthly interest rate : You are taking out a 100,000 mortgage loan to be repaid over 25 years in 300 monthly payments
Explaining models in system analysis and design : In System Analysis and Design: Models are widely used in wide variety of technical occupations beyond information technology.
What is the foreign exchange risk : What is the foreign exchange risk? What is the difference between balance sheet exposure and transaction exposure? Can you provide an example?
How far away is the reflecting surface : An unstretched spring has a length of 0.30 m. while the spring is stretched to a total length of 0.60 m, it supports traveling waves moving at 4.5 m/s. How fast would waves travel on this spring if it is stretched to 0.90 m.
The net present value criterion : A firm is considering to invest $75,000 in a personnel training program. The $75000 outlay will be charged off as an expense by the firm this year.
Currency exchange for exporters between us and japan : How would US exporter which receives 395,000 yen in 30 days contract in forward market to pay future invoice? How many dollars would the exporter receive? How much did the company make or lose on the transaction compared to the spot market? Descri..
Find out the density of the oil : An object is found to have a weight in air of 500N. It is then tied to a string connected to a balance and immersed in water (density of water is 1000 kg/m3). The scale now reads 450 N. at last the object is immersed in oil and is found to have a ..
Finding project schedule if critical path is identified : Describe in scholarly detail how you find out a project schedule once critical path has been identified.
Evaluate the operating cash flows of the project : Evaluate the operating cash flows of the project for the next 6 years id the firm's tax bracket is 35 percent - Has a new mower line that can generate revenues

Reviews

Write a Review

Corporate Finance Questions & Answers

  Valuation of stock through growth model

Valuation of stock through growth model - Are the PVGO figures correlated with the analyst estimated EPS growth rates? Would you think these two "growth" metrics should be correlated? Why or why not?

  Find the company''s current stock price

Calculation of required rate of return and valuation of current stock price - Find the company's current stock price?

  Find the companies total value with leverage

A firm is on the verge of a new product launch.  Depending on how well product does in marketplace, three possible outcomes for next years valuation are:  $210 m, $150 m or $60 m.

  Find the risk adjusted return

Manager A shows a return of 20 percent with a standard deviation of 17 percent. Manager B shows a return of 13% with a standard deviation of 6 percent.

  What order size should smith college acquire from vendor

Evaluation of EOQ Decisions of college on vendor's order - What order size should Smith College acquire from the vendor? Explain Why?

  Determine the present value of stock

Joe's Ski Shop Incorporated has maintained a dividend rate of $4/share for many years. The same rate is expected to be paid in future years.

  Developer of prepackaged software

Developer of prepackaged software and on-line retailer - warehouse club for food and general merchandise

  Describe the components of the current ratio

Describe the components of the current ratio and what does the current ratio measure also what are the reasons for using the current ratio for analysis?

  Explain what indicators would you look at to assess

Explain what indicators would you look at to assess whether your firm's long-term assets were impaired

  Accounting and finance for profit and non profit firm

I am looking employment in accounting & finance with a for profit firm or non profit organization.

  Find the equilibrium expected growth rate

Calculation of equilibrium expected growth rate - The dividend is expected to grow at some constant rate, g, forever. Find the equilibrium expected growth rate?

  Prepare a business plan for the organization

Review the quarterly report and prepare a business plan for the organization for its upcoming financial year. Be sure to include the following in your organized business plan:

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