What is the projects npv, TexMex Food Company is

What is the projects npv

Assignment Help Financial Management

Reference no: EM131164216

Problem :

TexMex Food Company is considering a new salsa whose data are shown below.

The equipment to be used would be depreciated by the straight-line method over its 3-year life and would have a zero salvage value, and no change in net operating working capital would be required.

Revenues and other operating costs are expected to be constant over the project's 3-year life.

However, this project would compete with other TexMex products and would reduce their pre-tax annual cash flows.

What is the project's NPV? (Hint: Cash flows are constant in Years 1-3.)

•WACC 10.0%
•Pre-tax cash flow reduction for other products (cannibalization) -$5,000
•Investment cost (depreciable basis) $80,000
•Straight-line depreciation rate 33.333%
•Annual sales revenues $67,500
•Annual operating costs (excl. depreciation) -$25,000
•Tax rate 35.0%

Reference no: EM131164216

Questions Cloud

Which would make more sense and renting or leasing the home : Another buy-or-lease alternative. You could buy the home for $300,000, putting 20% down and renting it out at $1400 a month. Which would make more sense? Renting or leasing the home?

How scientists learn past global temperatures and climates : How scientists learn about past global temperatures and climates. The greenhouse effect. Greenhouse gases and their role in current climate change.

Describe the five sources of power : Examine and describe the five sources of power and the four contingencies that can determine the potential of those power sources. Choose a present or former workplace organizational member who holds a source of power, and describe what sources of..

Define the five most important measures : Define the five most important measures of hospital performance and discuss the rationale for your selections. All references should be in APA format.

What is the projects npv : TexMex Food Company is considering a new salsa whose data are shown below. - -- What is the project's NPV?

Human resources impact the profession : How do ethical considerations related to human resources impact the profession and modify the way work is done?

What are the advantages and limitations of nuclear medicine : Explain the scientific and technical concepts related to nuclear medicine. Consider the following questions when you construct your response: What type of radiation is typically exploited in most nuclear medicine procedures? How are patients prepar..

Discuss what information the statement of cash flows offers : Discuss what information the statement of cash flows offers that the income statement and balance sheet do not provide, and how this information provides greater insight into business health and stability.

What is the executive saying : A marketing executive once said, "If the price elasticity of demand for your product is inelastic, then your price is probably too low." Considering the economic principles discussed in these chapters, what is the executive saying?

User Account

All Pages