NPV = cash outflow + net operating cash flow*PVAF at 8% for 10 years
0 =-45000+net operating cash flow*PVAF
0=-45000+operating cash flow*6.7100
0= -45000+6.7100 operating cash flow
Operating cash flow = 45000/6.7100 = 6706.327
PVAF at 8% for 10 Years = 1-(1+r)^-n / r = 1-(1.08)^-10 / .08 = 6.7100
EBIT = 2206.4/70% |
3152 |
|
less tax - 30% of EBIT |
3152*30% |
945.6 |
PAT-70% 0f EBIT |
6706.4-4500 |
2206.4 |
depreciation |
4500 |
|
operating cash flow |
6706.4 |
|
EBIT at which proposal is beneficial at 8% |
3152 |
Blossom Company management is considering a project that will require an initial investment of $45,000 and...
Problem 12.23 (Excel Video) Cullumber Company management is considering a project that will require an initial investment of $50,000 and will last for 10 years. No other capital expenditures or increases in working capital are anticipated during the life of the project. What is the annual EBIT that will make the project economically viable if the cost of capital for the project is 10 percent and the firm will depreciate the investment using straight-line depreciation and a salvage value of...
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...
M (Pty) Limited is considering a project that would require an initial investment of R924,000 and would have a useful life of 8 years. The annual cash receipts would be R600.000 and the annual cash expenses would be R240.000. The salvage value of the assets used in the project would be R138.000. The company uses a discount rate of 15%. Additional Working Capital of R400.000 will be required for the project. a) Compute the net present value of the project...
Blossom, Inc., is considering a five-year project with an initial investment of $20,000. What annual free cash flow (FCF) would be required for this project to have an NPV of $0 if the opportunity cost capital is 11 percent? (Round answer to 2 decimal places, e.g. 5,275.25.) Annual free cash flow?
Slick Company is considering a capital project involving a $225,000 investment in machinery and a $45,000 investment in working capital. The machine has an expected useful life of 10 years and no salvage value. The annual cash inflows (before taxes) are estimated at $90,000 with annual cash outflows (before taxes) of $30,000. The company uses straight-line depreciation. Assume the federal income tax rate is 40%. The company's new accountant computed the net present value of the project using a minimum...
Slick Company is considering a capital project involving a $225,000 investment in machinery and a $45,000 investment in working capital. The machine has an expected useful life of 10 years and no salvage value. The annual cash inflows (before taxes) are estimated at $90,000 with annual cash outflows (before taxes) of $30,000. The company uses straight-line depreciation. Assume the federal income tax rate is 40%. The company's new accountant computed the net present value of the project using a minimum...
Question 1 [15 Marks] Majimbos (Pty) Limited is considering a project that would require an initial investment of R924,000 and would have a useful life of 8 years. The annual cash receipts would be R600,000 and the annual cash expenses would be R240,000. The salvage value of the assets used in the project would be R138,000. The company uses a discount rate of 15%. Additional Working Capital of R400,000 will be required for the project. Required: a) Compute the net...
The management of Truelove Corporation is considering a project that would require an initial investment of $336,990 and would last for 7 years. The annual net operating income from the project would be $28.800, including depreciation of $44.170. At the end of the project, the scrap value of the project's assets would be $27,800. (Ignore income taxes.) Required: Determine the payback period of the project. (Round your answer to 2 decimal places.) Payback period < Prey 8 of 14 Next...
Wayne Company is considering a long-term investment project called ZIP. ZIP will require an investment of $121,720. It will have a useful life of 4 years and no salvage value. Annual revenues would increase by $80,100, and annual expenses (excluding depreciation) would increase by $40,100. Wayne uses the straight-line method to compute depreciation expense. The company’s required rate of return is 13%. Compute the annual rate of return Anual rate of return ____% Determine whether the project is acceptable? Accept/Reject...
g is considering a new average-risk investment project whose data are shown equipment would be depreciated on a straight-line basis with an expected salvage value at the 3-year life. The equipment is expected to be sold at the end of the project's life. 1. Timuran below. The end of the project's require some additional working capital that would be recovered at the end of the revenues and other Timuran would project's life. The Equipment cost Installation & commissioning cost Required...