What is the net present worth of the operation

Assignment Help Microeconomics
Reference no: EM131900200

Problem

An investor is purchasing a car repair facility with an initial cost of $90M. The facility will have before tax profit of $25M/Yr the first two years and $30M/Yr in years 3,4, and 5. At the end of year 5, it has to be disposed of at a cost of $10M with no resale value. The investor is using a straight-line depreciation method with an assumed life of 10 years and a resale value of $5M for depreciation purposes. He has a combined federal and state tax rate of 45%. His cost of money is 10%.

a-What is the net present worth of this operation?

b-Would he be better off using a DDB method of depreciation with the same assumptions?

Reference no: EM131900200

Questions Cloud

Compare and contrast the design and implementation issues : Compare and contrast the design and implementation issues that you would face in developing a set of relevant risk indicators.
Describe which is the best data collection method for client : Joe Spivey is president of Advantage Research, Inc. The ?rm specializes in customized research for clients in a variety of industries .
Calculate the after tax npw of this endeavor for the company : A manufacturing company spends $400,000 for the purchase and installation of a fully automated. Calculate the after tax NPW of this endeavor for the company.
Explain the triple constraint : Explain the triple constraint. What is the impact upon the triple constraint when new requirements are added to the project scope in the middle of project.
What is the net present worth of the operation : What is the net present worth of this operation? Would he be better off using a DDB method of depreciation with the same assumptions?
Calculate the depreciation and the book value of equipment : Calculate the depreciation and the book value of this equipment for the next 7 years. Use both straight-line and double declining balance depreciation methods.
How has the theory evolved to cope : How has the change in business purpose (i.e. manufacturing vs. service) and the business environment, worker attitudes, and behaviors affected the role.
How does ergonomics affect you in your everyday life : How does ergonomics affect you in your everyday life both at work and at home?
Develop targets brand resonance model : Develop Target's brand resonance model with six brand building blocks, and logically explain the resonance model you developed.

Reviews

Write a Review

Microeconomics Questions & Answers

  Does the fact that these assets might have value imply

An all-equity company (which has no debt) has a stock market value of $540 mil- lion. Its tangible assets comprise land, buildings, and machines. The land is worth $100 mil- lion. The buildings are worth $120 million. The replacement value of the ..

  What is the ratio of speed from full load to no-load

A 400V D.C. shunt motor takes 5A at no-load. Ra(Armature Resistance) = 0.5 ohms, Rf(Field Resistance) = 200ohms. What is the ratio of speed from full load to no-load, when the D.C. shunt motor takes 50A on full load?

  What kind of returns to scale seems to characterize the bus

consider the following cobb-douglas production function for the bus transportation system in a particular

  Define observations on the market price and the quantity

Following are observations on the market price and the quantity of good X produced and consumed in three different years: $10 and 100 units, $4 and 57 units, and $8 and 88 units. Can we conclude that the market demand for X slopes upward

  Difference in distribution mechanism for goods and services

Explain the difference in the distribution mechanism for goods and services in the market and command systems. Discuss the implications of this difference.

  How do you explain the decrease in the number of manufacture

At the beginning of the twentieth century, there were many small American automobile manufacturers. At the end of the century, there were only three large ones.

  Discuss briefly the shape of the yield curve

The yield of a 1-year bond is 3%, the yield of a 3-year bond is 5%, and the expectation on a 1- year bond sold in two years is 4%.

  Determining the interest to shirk

When a worker announces that he plans to quit, say next month, the "threat" of being fired has no bite. The worker may find it in his interest to shirk. What can the manager do to overcome this problem?

  What is the gini coefficient now

suppose the poorest 90 percent of citizens actually have an income of $15,000 because each receives $5,000 of unreported income from the underground economy. what is the Gini coefficient now?

  Calculate medal shares for total medals won

Calculate medal shares for total medals won, for each country,  by year. The medal share for country in a year is the proportion of the   total number of medals awarded in that year's Olympics that is awarded to  the country. To calculate the me..

  Decrease in the autonomous demand for investment

Use algebra to derive (i.e. show how one equation follows from the other), from national income account identities

  In the short run a firm operating in a competitive industry

in the short run a firm operating in a competitive industry will shut down if price isa. less than average total cost.

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