Project Cost= 10,431.70 Life of the plant= 12 year Salvage Value= 521.59 EBIT= 1877 Tax Rate=...

Question

Question

Project Cost= 10,431.70 Life of the plant= 12 year Salvage Value= 521.59 EBIT= 1877 Tax Rate=...

Project Cost= 10,431.70 Life of the plant= 12 year Salvage Value= 521.59 EBIT= 1877 Tax Rate= 35% WACC= 5.73% NPR? IRR? Discounted payback period ?

business accounting

Add a comment Improve this question Transcribed image text

Answer 1

Answer #1

Depreciation per year = (10,431.70 - 521.59) / 12
= 825.84

EBIT = 1877
Less: Tax 35% = 656.94
Net Income = 1220.05
Add: Depreciation = 825.84
Annual cash inflow = 2045.89

Calculation of NPV and IRR.

Here IRR is calcualted using the excel formula of IRR.

Discounted payback period:
Total present value of cash inflows upto 6 years = $10,145.98
Balance of Investment will be recovered in Year 7 i.e. $10,431.70 - $10,145.98 = $285.72
Discounted payback period = 6 years + $285.72 / $1,385.07
= 6 + 0.21 = 6.21 years

Add a comment

Answer 2

Similar Homework Help Questions

HURDLE RATE IS 5.55% Frm's net property, plant, and equipment is $31,603 in Millions The firm...

HURDLE RATE IS 5.55% Frm's net property, plant, and equipment is $31,603 in Millions The firm is looking to expand its operations by 10% of the firm's net property, plant, and equipment. (Calculate this amount by taking 10% of the property, plant, and equipment figure that appears on the firm's balance sheet.) The estimated life of this new property, plant, and equipment will be 12 years. The salvage value of the equipment will be 5% of the property, plant and...
HURDLE RATE IS 5.55% Frm's net property, plant, and equipment is $31,603 in Millions The firm...

HURDLE RATE IS 5.55% Frm's net property, plant, and equipment is $31,603 in Millions The firm is looking to expand its operations by 10% of the firm's net property, plant, and equipment. (Calculate this amount by taking 10% of the property, plant, and equipment figure that appears on the firm's balance sheet.) The estimated life of this new property, plant, and equipment will be 12 years. The salvage value of the equipment will be 5% of the property, plant and...
Do in Excel. Southwest Products Company is considering a project to invest. The initial investment is...

Do in Excel. Southwest Products Company is considering a project to invest. The initial investment is $15 million and the life of the project is 7 years. Its revenue per year is $10 million and cost of goods sold is 50% of revenue. The project will be depreciated by using the 7-year MACRS depreciation rate. The company’s tax rate 35% and cost of capital is 12%. Calculate payback period, discounted payback period, NPV, IRR, PI and MIRR for the project.

You are is considering replacing a five-year-old machine that originally cost $50,000. It was being depreciated...

You are is considering replacing a five-year-old machine that originally cost $50,000. It was being depreciated using straight-line to an expected salvage value of zero over its original 10-year life and could now be sold for $40,000. The replacement machine would cost $190,000 and have a five-year expected life. It would be depreciated using the MACRS 5-year class life. The actual expected salvage value of this machine after five years is $20,000. The new machine is expected to operate much...
Initial investment $ 300,000 Pretax salvage value $ 35,000 Cost savings per year $ &n

Initial investment $ 300,000 Pretax salvage value $ 35,000 Cost savings per year $ 85,000 Working capital reduction $ 55,000 Tax rate 35% *Depreciation straight-line over life 5 What is the IRR of the project?
Initial investment $ 300,000 Pretax salvage value $ 35,000 Cost savings per year $ &n

Initial investment $ 300,000 Pretax salvage value $ 35,000 Cost savings per year $ 85,000 Working capital reduction $ 55,000 Tax rate 35% *Depreciation straight-line over life 5 What is the IRR of the project?

5. Which of the following is/are correct? A. If the salvage value is the same as...

5. Which of the following is/are correct? A. If the salvage value is the same as the book value of the asset, then there is a tax effect. B. Book value = initial cost - accumulated depreciation C. After-tax salvage = salvage - Tax Rate x (salvage - book value) D. Both B and C 6. ________ is the most important alternative to Net Present Value. A. IRR B. Payback Method C. Average Accounting Return D. Discounted Payback 7. The...
We are evaluating a project that costs $932,000, has a 12-year life, and has no salvage...

We are evaluating a project that costs $932,000, has a 12-year life, and has no salvage value. Assume depreciation is straight-line to zero over the life of the project. Sales are projected at 75,000 units per year, the price per unit is $39, variable cost per unit is $26, and fixed costs are $778,900 per year. The tax rate is 35 percent and we require a return of 13.5 percent on this project. Suppose the projections given for price, quantity,...
We are evaluating a project that costs $837,434, has an eight-year life, and has no salvage...

We are evaluating a project that costs $837,434, has an eight-year life, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 56,652 units per year. Price per unit is $39, variable cost per unit is $19, and fixed costs are $421,397 per year. The tax rate is 35%, and we require a return of 21% on this project. Calculate the Accounting Break-Even Point. We are evaluating a...

Smithsonian Co. just acquired for a new project with a 5 year life a new plant...

Smithsonian Co. just acquired for a new project with a 5 year life a new plant for 16,000,000 Euros that it will depreciate straight line in 4 years. The company keeps a constant debt amount (9,648,480 Euro). The project will have a 2,300,000 Euro expected EBIT for each year of the life of the project, a cost of levered equity equal to 15%, a debt-to-equity ratio of 0.75 and a wacc equal to 9.50%. The corporate tax rate is 34%....

Project Cost= 10,431.70 Life of the plant= 12 year Salvage Value= 521.59 EBIT= 1877 Tax Rate=...

Homework Answers

Add Answer to:
Project Cost= 10,431.70 Life of the plant= 12 year Salvage Value= 521.59 EBIT= 1877 Tax Rate=...

Post as a guest

Earn Coins

HURDLE RATE IS 5.55% Frm's net property, plant, and equipment is $31,603 in Millions The firm...

HURDLE RATE IS 5.55% Frm's net property, plant, and equipment is $31,603 in Millions The firm...

Do in Excel. Southwest Products Company is considering a project to invest. The initial investment is...

You are is considering replacing a five-year-old machine that originally cost $50,000. It was being depreciated...

Initial investment $ 300,000 Pretax salvage value $ 35,000 Cost savings per year $ &n

Initial investment $ 300,000 Pretax salvage value $ 35,000 Cost savings per year $ &n

5. Which of the following is/are correct? A. If the salvage value is the same as...

We are evaluating a project that costs $932,000, has a 12-year life, and has no salvage...

We are evaluating a project that costs $837,434, has an eight-year life, and has no salvage...

Smithsonian Co. just acquired for a new project with a 5 year life a new plant...

Project Cost= 10,431.70 Life of the plant= 12 year Salvage Value= 521.59 EBIT= 1877 Tax Rate=...

Homework Answers

Add Answer to: Project Cost= 10,431.70 Life of the plant= 12 year Salvage Value= 521.59 EBIT= 1877 Tax Rate=...

Post as a guest

Earn Coins

Add Answer to:
Project Cost= 10,431.70 Life of the plant= 12 year Salvage Value= 521.59 EBIT= 1877 Tax Rate=...