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2. Your company may introduce a new line of tennis rackets. Initial Investment of $1,000,000, straight...
Consider a five-year project with the following information: initial fixed asset investment = $1,060,000; straight-line depreciation...
Consider a five-year project with the following information: initial fixed asset investment = $1,060,000; straight-line depreciation to zero over the ten-year life; zero salvage value; price = $42.50/unit; variable costs = $19.70/unit; fixed costs = $412,000 per year; quantity sold = 200,000 units per year; tax rate = 25%. How sensitive is OCF to changes in quantity sold (i.e., what is the change in OCF given an increase of one unit sold in a year)? $17.10 $16.22 $15.41 $14.63 $18.59
A project requires an initial fixed asset investment of $600,000, which will be depreciated straight-line to...
A project requires an initial fixed asset investment of $600,000, which will be depreciated straight-line to zero over the six-year life of the project. The pre-tax salvage value of the fixed assets at the end of the project is estimated to be $50,001. Projected sales volume for each year of the project is shown below. The sale price is $50 per unit for the first three years, and $45 per unit for years 4 through 1. A $30,000 initial investment...
1) Cochrane, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment of...
1) Cochrane, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment of $2,370,000. The fixed asset will be depreciated straight-line to zero over its three-year tax life, after which time it will be worthless. The project is estimated to generate $2,240,000 in annual sales, with costs of $1,230,000. Required: If the tax rate is 35 percent, what is the OCF for this project? (Do not round intermediate calculations. Enter your answer in dollars, not...
Consider a three-year project with the following information: initial fixed asset investment = $705,000; straight-line depreciation...
Consider a three-year project with the following information: initial fixed asset investment = $705,000; straight-line depreciation to zero over the 5-year life; zero salvage value; price = $39.31; variable costs = $28.25; fixed costs = $329,000; quantity sold = 86,000 units; tax rate = 23 percent. a. What is the OCF at the base-case quantity sold? OCF= b. What is the OCF at 87,000 units sold? OCF= c. How sensitive is OCF to changes in quantity sold?
You are the financial analyst for a tennis racket manufacturer. The company is considering using a...
You are the financial analyst for a tennis racket manufacturer. The company is considering using a graphitelike material in its tennis rackets. The company has estimated the information in the following table about the market for a racket with the new material. The company expects to sell the racket for six years. The equipment required for the project has no salvage value and will be depreciated on a straight-line basis. The required return for projects of this type is 13...
You are the financial analyst for a tennis racket manufacturer. The company is considering using a...
You are the financial analyst for a tennis racket manufacturer. The company is considering using a graphitelike material in its tennis rackets. The company has estimated the information in the following table about the market for a racket with the new material. The company expects to sell the racket for six years. The equipment required for the project has no salvage value and will be depreciated on a straight-line basis. The required return for projects of this type is 13...
Consider a project with the following information: Initial fixed asset investment = $495,000; straight-line depreciation to...
Consider a project with the following information: Initial fixed asset investment = $495,000; straight-line depreciation to zero over the 4-year life; zero salvage value; price = $43; variable costs = $26; fixed costs = $195,000; quantity sold = 94,000 units; tax rate = 22 percent. How sensitive is OCF to changes in quantity sold?
Sensitivity AnalysisConsider a project with the following information: Initial fixed asset investment = $485,000; straight-line depreciation...
Sensitivity AnalysisConsider a project with the following information: Initial fixed asset investment = $485,000; straight-line depreciation to zero over the 4-year life; zero salvage value; price = $41; variable costs = $24; fixed costs = $189,000; quantity sold = 90,000 units; tax rate = 23 percent. How sensitive is OCF to changes in quantity sold?
Cochrane, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment...
Cochrane, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment of $2,610,000. The fixed asset will be depreciated straight-line to zero over its three-year tax life, after which time it will be worthless. The project is estimated to generate $2,320,000 in annual sales, with costs of $1,310,000. Required: If the tax rate is 40 percent, what is the OCF for this project? (Do not round intermediate calculations. Enter your answer in dollars, not millions...
Consider a four-year project with the following information: initial fixed asset investment = $610,000; straight-line depreciation...
Consider a four-year project with the following information: initial fixed asset investment = $610,000; straight-line depreciation to zero over the four-year life; zero salvage value; price = $48; variable costs = $36; fixed costs = $285,000; quantity sold = 112,000 units; tax rate = 25 percent. How sensitive is OCF to changes in quantity sold?
A project requires an initial fixed asset investment of $600,000, which will be depreciated straight-line to zero over the six-year life of the project. The pre-tax salvage value of the fixed assets at the end of the project is estimated to be $50,001. Projected sales volume for each year of the project is shown below. The sale price is $50 per unit for the first three years, and $45 per unit for years 4 through 1. A $30,000 initial investment...
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