Mideque, Inc., is considering a project to produce pens. It is estimated that the initial cost of the equipment, including transportation, installation, and so forth, will be $ 22,361. Mideque also estimates that the revenues (sales) each year over the five-year life of the project will be $12,177. The other yearly expenses (e.g., cost of goods sold, wages and salaries, etc.), will be $5,044. Mideque will finance $9,525 by loan with an interest rate of 15 percent per year. The loan will be repaid at the rate of $2,631 per year plus interest on the remaining balance each year. Mideque uses straight-line depreciation, and at the end of the life of this project the equipment can be sold for $4,213. Assume a corporate-profits tax rate of 45 percent. Assume that the working capital requirement will be $1,818 and that the IRS allows an investment tax credit of 10 percent for this kind of project. Compute the initial investment.
Round your final answer to 2 decimal places.
Initial investment = initial cost of equipment + working capital investment
= 22,361 + 1,818 = 24,179
(Investment tax credit will be charged when the company has sufficient tax liability.)
Mideque, Inc., is considering a project to produce pens. It is estimated that the initial cost...
Mideque, Inc., is considering a project to produce pens. It is estimated that the initial cost of the equipment, including transportation, installation, and so forth, will be $ 22,692. Mideque also estimates that the revenues (sales) each year over the five-year life of the project will be $14,893. The other yearly expenses (e.g., cost of goods sold, wages and salaries, etc.), will be $6,420. Mideque will finance $9,805 by loan with an interest rate of 13 percent per year. The...
Mideque, Inc., is considering a project to produce pens. It is estimated that the initial cost of the equipment, including transportation, installation, and so forth, will be $ 22,692. Mideque also estimates that the revenues (sales) each year over the five-year life of the project will be $14,893. The other yearly expenses (e.g., cost of goods sold, wages and salaries, etc.), will be $6,420. Mideque will finance $9,805 by loan with an interest rate of 13 percent per year. The...
mideque, inc., is considering a project to produce pens. it is estimated that the initial cost of the equipment, including transportation, installation, and so forth, will be $22,995. mideque also estimates that the revenues (sales) each year over the five-year life of the project will be $12,690. the other yearly expenses (e.g., cost of goods sold, wages, and salaries, etc) will be $6955 mideque will finance $9253 by loan with an interest rate of 13% per year. the loan will...
mideque, inc., is considering a project to produce pens. it is estimated that the initial cost of the equipment, including transportation, installation, and so forth, will be $23,236. mideque also estimates that the revenues (sales) each year over the five-year life of the project will be $12,337. The other yearly expenses (e.g. cost of goods sold, wages and salaries, etc.), will be $7142. Mideque will finance $8409 by loan with an interest rate of 12% per year. the loan will...
Mideque, Inc., is considering a project to produce pens. Assume that this is a replacement project. The old equipment can be sold for $10,762 as of today. It was bought five years ago for $22,251 and is assumed to last for five more years with no salvage value at the end of its life. The initial cost of the new equipment, including transportation, installation, and so forth, will be $ 23,081. Mideque also estimates that this new equipment will save...
mideque, inc. is considering a project to produce pens. assume that this is a replacement project. the old equipment can be sold for $10,854 as of today. it was bought five years ago for $21,933 and is assumed to last for five more years with no salvage value at the end of its life. the initial cost of the new equipment, including transportation, installation and so forth, will be $23,355. mideque also estimates that this new equipment will save the...
Mideque, Inc., is considering a project to produce pens. Assume that this is a replacement project. The old equipment can be sold for $9,844 as of today. It was bought five years ago for $22,884 and is assumed to last for five more years with no salvage value at the end of its life. The initial cost of the new equipment, including transportation, installation, and so forth, is estimated to be $ 24,596. Mideque also estimates that this new equipment...
ABC Corporation is considering a project with the following projected numbers: Initial investment to purchase equipment $260,000 Net working capital investment $16,500 Depreciate equipment to zero book value over the 4 year life of the project Estimated salvage value of the equipment is $50,000 at the end of the project All of net working capital recouped at end of the project $82,000 per year operating cash flow 12 percent discount rate. What is the NPV of the project if the...
Gateway Communications is considering a project with an initial fixed assets cost of $1.51 million that will be depreciated straight-line to a zero book value over the 9-year life of the project. At the end of the project the equipment will be sold for an estimated $244,000. The project will not change sales but will reduce operating costs by $407,000 per year. The tax rate is 35 percent and the required return is 11.9 percent. The project will require $54,000...
Gateway Communications is considering a project with an initial fixed assets cost of $1.49 million that will be depreciated straight-line to a zero book value over the 9-year life of the project. At the end of the project the equipment will be sold for an estimated $246,000. The project will not change sales but will reduce operating costs by $411,000 per year. The tax rate is 34 percent and the required return is 12.1 percent. The project will require $55,000...