ZuoTi.Pro
Question

IBT Tech Inc is considering a new 3-year investment project that requires an initial fixed asset...

IBT Tech Inc is considering a new 3-year investment project that requires an initial fixed asset investment of $4.49 million. The fixed asset will be depreciated straight-line to zero over its three-year life. The project is estimated to generate $3,010,000 in sales per year with additional costs of $905,000 per year. The tax rate is 30% and the required return (appropriate discount rate) is 16%. The fixed asset should have a market (or salvage) value of $595,000 at the end of the project. In addition, the project requires an initial investment in net working capital of $160,000 which will be fully recovered in the third year.

Please attach a file that clearly shows calculations for (A) the NPV of this investment, and (B) the marginal tax rate that would cause the firm to reverse decision based on NPV in part A (tax rate that yields NPV=0). Please highlight your final answer in red so I can find it easily!

business   finance   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Request Professional Answer

Request Answer!

We need at least 10 more requests to produce the answer.

0 / 10 have requested this problem solution

The more requests, the faster the answer.

Request! (Login Required)

All students who have requested the answer will be notified once they are available.
Know the answer?
Add Answer to:
IBT Tech Inc is considering a new 3-year investment project that requires an initial fixed asset...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Similar Homework Help Questions

  • IBT Tech Inc is considering a new 3-year investment project that requires an initial fixed asset...

    IBT Tech Inc is considering a new 3-year investment project that requires an initial fixed asset investment of $4.49 million. The fixed asset will be depreciated straight-line to zero over its three-year life. The project is estimated to generate $2,950,000 in sales per year with additional costs of $952,000 per year. The tax rate is 30% and the required return (appropriate discount rate) is 16%. The fixed asset should have a market (or salvage) value of $595,000 at the end...

  • Cochrane, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment of $...

    Cochrane, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment of $1,860,000. 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 $1,950,000 in annual sales, with costs of $1,060,000. The project requires an initial investment in net working capital of $150,000, and the fixed asset will have a market value of $175,000 at the end of...

  • H. Cochran, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment...

    H. Cochran, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment of $2,350,000. The fixed asset will be depreciated straight-line to zero over its three-year tax life. The project is estimated to generate $2,290,000 in annual sales, with costs of $1,310,000. The project requires an initial investment in net working capital of $160,000 and the fixed asset will have a market value of $195,000 at the end of the project. Assume that the tax...

  • H. Cochran, Inc., is considering a new three-year expansion project that requires an initial fixed asset...

    H. Cochran, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment of $2,800,000. 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 $3,010,000 in annual sales, with costs of $2,030,000. If the tax rate is 23 percent, what is the OCF for this project? (Do not round intermediate calculations and round your answer to 2 decimal...

  • Phone Home, Inc. is considering a new 4-year expansion project that requires an initial fixed asset...

    Phone Home, Inc. is considering a new 4-year expansion project that requires an initial fixed asset investment of $3 million. The fixed asset will be depreciated straight-line to zero over its 4-year tax life, after which time it will have a market value of $225,000. The project requires an initial investment in net working capital of $330,000, all of which will be recovered at the end of the project. The project is estimated to generate $2,640,000 in annual sales, with...

  • 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 $2.1 million. 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 $2,150,000 in annual sales, with costs of $1,140,000. Assume the tax rate is 35 percent and the required return on the project is 14 percent. WHAT IS THE PROJECTS NPV?

  • Quad Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment...

    Quad Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2.43 million. The fixed asset will be depreciated straight-line to zero over its three-year tax life and is estimated to have a market value of $281,289 at the end of the project. The project is estimated to generate $2,102,812 in annual sales, with costs of $805,313. The project requires an initial investment in net working capital of $361,924. If the tax rate is...

  • Quad Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment...

    Quad Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2.41 million. The fixed asset will be depreciated straight-line to zero over its three-year tax life and is estimated to have a market value of $213,186 at the end of the project. The project is estimated to generate $2,105,355 in annual sales, with costs of $883,025. The project requires an initial investment in net working capital of $377,259. If the tax rate is...

  • H. Cochran, Inc., is considering a new three-year expansion project that requires an initial fixed asset...

    H. Cochran, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment of $2,550,000. The fixed asset will be depreciated straight-line to zero over its three-year tax life. The project is estimated to generate $2,300,000 in annual sales, with costs of $1,290,000. The project requires an initial investment in net working capital of $165,000, and the fixed asset will have a market value of $190,000 at the end of the project. Assume that the tax...

  • H. Cochran, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment of...

    H. Cochran, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment of $2,250,000. 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 $2,200,000 in annual sales, with costs of $1,190,000. Assume the tax rate is 40 percent and the required return on the project is 11 percent.    What is the project’s NPV?

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT