What is the incremental npv of the add-on investment

Assignment Help Finance Basics

Reference no: EM132195944

Question - Incremental NPV

Corpus Christi Partners has evaluated a major expansion that had a positive NPV of $4,500,000. Joe Whitman is proposing an "add-on" to the expansion. He believes investing an additional $500.000 in net working capital would increase the annual revenues by $140,000 per year and increase the annual cash operating expenses by $40,000 per year over the 10-year life of the project. The investment in net working capital would not affect depreciation schedules and the firm gets it back at the end of 10 years. The firm has a 30% tax rate and the project has a 10% cost of capital.

a. Assuming Joe's estimates are correct, what are the outlay, the annual net operating cash flow, and the after-tax salvage value for the "add-on" project?

b. What is the incremental NPV of the "add-on" investment in net working capital?

c. What is the combined NPV of the expansion and the "add-on" project?

Reference no: EM132195944

Questions Cloud

Discuss the issues associated with prototyping the new form : As part of a larger systems project, a bank wants your help in setting up a new monthly reporting form for its savings account customers.

Identify strategic initiative : Identify a strategic initiative that an organization you admire is currently undertaking or has undertaken.

How a business is going to achieve the goals : A business plan is a written document that describes in detail how a business is going to achieve its goals in order to be successful.

Communicate new visions to department and why that order : What mediums would you employ and in what order to communicate new visions to a department and why that order.

What is the incremental npv of the add-on investment : Corpus Christi Partners has evaluated a major expansion that had a positive NPV of $4,500,000. What is the incremental NPV of the "add-on" investment

Describe the nearest airport and the surroundings : Describe the nearest airport and the surroundings. For which application could LAANC be used most likely there?

Brief introduction to project company-product-service : Develop a 3 - 5 page media plan for this section that examines the identification of the target market, clearly states the communication message.

Ejection seats designed for men weighing : Assume that military aircraft use ejection seats designed for men weighing between 139 lb and 205 lb. If? women's weights are normally distributed with a mean

Formulate global information technology plans : Formulate global information technology plans to manage their worldwide expansion.

User Account

All Pages