Question

F.E

7. Calculate the NPV for the following project. Use straight line depreciation over four-year period. Assume zero salvage at the end of the four years, with no required additional working capital.   Calculate the NPV to the nearest cent xx.xx and enter without the dollar sign.

WACC                                                                           14.9%

Additional investment in fixed assets (depreciable basis) $100,000

Straight-line depreciation rate                                                   25%

Annual sales revenues (constant for all the years) $75,000

Operating costs (excl. depreciation) (also constant) $25,000

Tax rate 21.0%

8. If your stock moves from $88 to $110 over one year and also pays $3 in dividends, the rate of return would be: Answer as a percent return  to the nearest hundredth of a percent as in xx.xx without entering a percent symbol.  For negative returns include a negative sign.

Answer 1

7)

Costs Depreciation on Year Revenue 0 1 $ 75,000 $ 2 $ 75,000 $ 30 $ 75,000 $ 4 $ 75,000 $ 25,000 $ 25,000 $ 25,000 $ 25,000 $ 25,000 $ 25,000 $ 25,000 $ 25,000 $ Depreciati After-tax PBT Tax@21% Net income OCF Investment $ -100,000 $ 25,000 $ 5,250 $ 19,750 $ 25,000 $ 44,750 $ 25,000 $ 5,250 $ 19,750 $ 25,000 $ 44,750 $ 25,000 $ 5,250 $ 19,750 $ 25,000 $ 44,750 $ 25,000 $ 5,250 $ 19,750 $ 25,000 $ 44,750 $ $ Cash flow -100,000 44,750 44,750 44,750 44,750 PVIF @14.9% Present value 1.000 $ -100,000.00 0.870 $ 38,946.91 0.757 $ 33,896.35 0.659 $ 29,500.74 0.574 $ 25,675.15 Net present value $ 28,019.15

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