Homework Answers
We see that the project's IRR using Excel
=IRR({-100000;15000;15000;25000;25000;25000+20000})
=6.59%
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Unanswered A company is considering a project that will cost $100,000. To determine market potential, the...
Unanswered A company is considering a project that will cost $100,000. To determine market potential, the...
Unanswered A company is considering a project that will cost $100,000. To determine market potential, the company paid $5000 to a firm to perform market research. The firm estimates that the project will produce $15,000 in the first 2 years and $25,000 in the remaining 3 years. At the end of the project the company can sell the assets for $20,000 after taxes. The hurdle rate is 6.5%. Which of the following is true about the cost of the market...
A company is considering a project that will cost $100,000. To determine market potential, the company...
A company is considering a project that will cost $100,000. To determine market potential, the company paid $5000 to a firm to perform market research. The firm estimates that the project will produce $15,000 in the first 2 years and $25,000 in the remaining 3 years. At the end of the project the company can sell the assets for $20,000. The hurdle rate is 6.5%. Given the IRR that you calculated in the previous problem, which of the following is...
Your company is considering a project with the following cash flows: an immediate investment of $100,000...
Your company is considering a project with the following cash flows: an immediate investment of $100,000 and cash inflows of $25,000 for 5 years (starting in year 1). If your discount rate for this project is 6%, what is the project's NPV? $205,309 $25,000 $5,309 $105,309
A project Kyle Company is considering will require an initial investment of $100,000 and is expected...
A project Kyle Company is considering will require an initial investment of $100,000 and is expected to generate the following cash flows: Year 1 $35,000 Year 2 $25,000 Year 3 $20,000 Year 4 $20,000 Year 5 $15,000 What is the project’s payback period?
Your company is considering a new project. The project requires to purchase an equipment of $100,000....
Your company is considering a new project. The project requires to purchase an equipment of $100,000. The equipment will be depreciated over the five years period with straight-line depreciation. Revenues and other operating costs are expected to be constant over the project's 10-year expected operating life. The expected revenue is $50,000 per year, and the operating cost (excluding depreciation) is $25,000. The tax rate is 30%. What is the expected cash flow in year 5? (C) $3,500 $17,500 $23,500 $25,000...
Considering a new project to retrofit a pump. The initial cost of the project is $100,000,...
Considering a new project to retrofit a pump. The initial cost of the project is $100,000, and will save the company $25,000 per year in utility costs (income to the company). The salvage value of the pump after the 5 year life is $20,000. Use NPV at 8% interest rate to determine if this is a good investment. What is the payback?
A company is considering a three-year project. New equipment will cost $200,000. The equipment falls in...
A company is considering a three-year project. New equipment will cost $200,000. The equipment falls in the MACRS three-year class (.3333, .4445, .1481, .0741) it will have a salvage value at the end of the Project of $50,000. The project is expected to produce sales of $100,000 in the first year and sales will increase by $50,000 each year after that. Expenses are expected to be 40% of sales. An investment in net-working capital of $5000 is required at the...
Telecom Italia is considering the investment in a capital project. The initial cost in year 0...
Telecom Italia is considering the investment in a capital project. The initial cost in year 0 is $130,000 to be depreciated straight over 5 years to an expected salvage value of $15,000. The firm’s tax rate is 35% and it has a 10% cost of capital (the firm's discount rate, or "hurdle" rate). For this project an additional investment in working capital of $12,000 is required and it will be recovered in full at the end of the project’s life....
Your company is considering a new project that will require $100,000 of new equipment at the...
Your company is considering a new project that will require $100,000 of new equipment at the start of the project. The equipment will have a depreciable life of 10 years and will be depreciated to a book value of $25,000 using straight-line depreciation. The cost of capital is 11 percent, and the firm's tax rate is 34 percent. Estimate the present value of the tax benefits from depreciation.
wster's is considering a project with a life of 5 years and an initial cost of...
wster's is considering a project with a life of 5 years and an initial cost of $120,000. The discount rate for the project The firm expects to sell 2,100 units a year at a net cash flow per unit of $20. The firm will have the option to abandon this project after three years at which time it could sell the project for $50,000. The firm is interested in knowing how the project will perform if the sales forecasts for...
Unanswered A company is considering a project that will cost $100,000. To determine market potential, the company paid $5000 to a firm to perform market research. The firm estimates that the project will produce $15,000 in the first 2 years and $25,000 in the remaining 3 years. At the end of the project the company can sell the assets for $20,000 after taxes. The hurdle rate is 6.5%. Which of the following is true about the cost of the market...
A company is considering a project that will cost $100,000. To determine market potential, the company paid $5000 to a firm to perform market research. The firm estimates that the project will produce $15,000 in the first 2 years and $25,000 in the remaining 3 years. At the end of the project the company can sell the assets for $20,000. The hurdle rate is 6.5%. Given the IRR that you calculated in the previous problem, which of the following is...
Your company is considering a new project. The project requires to purchase an equipment of $100,000. The equipment will be depreciated over the five years period with straight-line depreciation. Revenues and other operating costs are expected to be constant over the project's 10-year expected operating life. The expected revenue is $50,000 per year, and the operating cost (excluding depreciation) is $25,000. The tax rate is 30%. What is the expected cash flow in year 5? (C) $3,500 $17,500 $23,500 $25,000...
wster's is considering a project with a life of 5 years and an initial cost of $120,000. The discount rate for the project The firm expects to sell 2,100 units a year at a net cash flow per unit of $20. The firm will have the option to abandon this project after three years at which time it could sell the project for $50,000. The firm is interested in knowing how the project will perform if the sales forecasts for...
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