A company is considering an investment in a new product with a 10-year horizon (product will...
A company is considering an investment in a new product with a 10-year horizon (product will be sold for 10 years). The upfront investment is $7 million and it is assumed to depreciate on a straight-line basis for 10 years, with no residual value. Fixed costs are assumed to be $500,000 per year. The company estimates variable cost per unit (v) to be $75 and expects to sell each unit for $315. There are no taxes and the required rate of return is 22% per year. Assume that the investment would occur today, and all future cash-flows will occur at the end of each year beginning in one year.
What is the financial breakeven quantity? [Keep
at least 3 decimals for intermediate answers. Round your final
answer UP to the next highest WHOLE unit. (ie 421.2 would
be rounded to 422)]
Homework Answers
Add Answer to:
A company is considering an investment in a new product with a
10-year horizon (product will...
Innovation Company is thinking about marketing a new software product. Upfront costs to market and develop...
Innovation Company is thinking about marketing a new software product. Upfront costs to market and develop the product are $4.97 million. The product is expected to generate profits of $1.19 million per year for ten years. The company will have to provide product support expected to cost $90,000 per year in perpetuity. Assume all profits and expenses occur at the end of the year a. What is the NPV of this investment if the cost of capital is 5.9%? Should...
Innovation Company is thinking about marketing a new software product. Upfront costs to market and develop...
Innovation Company is thinking about marketing a new software product. Upfront costs to market and develop the product are $4.92 million. The product is expected to generate profits of $1.01 million per year for ten years. The company will have to provide product support expected to cost S93,000 per year in perpetuity. Assume all profits and expenses occur at the end of the year. a. What is the NPV of this investment if the cost of capital is 6.4%? Should...
Innovation Company is thinking about marketing a new software product. Upfront costs to market and develop...
Innovation Company is thinking about marketing a new software product. Upfront costs to market and develop the product are $4.92 million. The product is expected to generate profits of $1.19 million per year for ten years. The company will have to provide product support expected to cost $91,000 per year in perpetuity. Assume all profits and expenses occur at the end of the year. a. What is the NPV of this investment if the cost of capital is 5.7%? Should...
Your company is considering a $500,000 investment, today, in a new production facility. Production would commence...
Your company is considering a $500,000 investment, today, in a new production facility. Production would commence two years from today and initial revenues would be realized at the end of the first year of production. Revenues are estimated to be $300,000 for the first production year, but are expected to fall $30,000 each year thereafter because of a forecasted decline in demand. Meanwhile, operating expenses are incurred at the beginning of each production year and are estimated to be $80,000...
Company Z is making an investment in a new plant and equipment. They had originally expected...
Company Z is making an investment in a new plant and equipment. They had originally expected to depreciate the assets over a 10-year basis, but then found that they could depreciate over 7 years instead (thereby increasing the amount depreciated each year). If Company Z depreciates over 7 years, which of the following would occur? a. The firm's operating income (EBIT) would increase. b. The firm's taxable income would increase. c. The firm's reported net income would increase. d. The...
A) Malkind Hardware is adding a new product line that will require an investment of $1,454,000....
A) Malkind Hardware is adding a new product line that will require an investment of $1,454,000. Managers estimate that this investment will have a 10-year life and generate net cash inflows of $300,000 the first year, $290,000 the second year, and $240,000 each year thereafter for eight years. Assume the project has no residual value. Compute the ARR for the investment. Round to two places. Select the formula, then enter the amounts to calculate the ARR (accounting rate of return)...
nnovation Company is thinking about marketing a new software product. Upfront costs to market and develop...
nnovation Company is thinking about marketing a new software product. Upfront costs to market and develop the product are $4.98 million. The product is expected to generate profits of $1.05 million per year for ten years. The company will have to provide product support expected to cost $90,000 per year in perpetuity. Assume all profits and expenses occur at the end of the year. a What s the NPV of this investment if the cost of capital is 6.1%? Should...
3. An investor with a 5-year investment horizon is considering the purchase of 30-year 6%coupon bond...
3. An investor with a 5-year investment horizon is considering the purchase of 30-year 6%coupon bond selling for $850 and a par value of $1000. The vield to maturity for the bond is 7.2%. Suppose the investor faces a reinvestment rate of 5% per year and anticipates selling the bond in 5 years to yield 6% on the 25-year remaining maturity in 5 years. Calculate his total return from the investment. (17 pt.)
Question 2 25 Marks Kavango Ltd is considering investing in a project at a cost of...
Question 2 25 Marks Kavango Ltd is considering investing in a project at a cost of N$3 000 000. The estimated economic life of the project is 5 years. The company will use the straight-line method to depreciate the cost of the project over 5 years. The company estimates that sales will amount to 240 000 units per year at an estimated selling price of N$40 per unit. The company expects to incur fixed overheads, excluding depreciation of N$300 000...
Martin Company is considering the introduction of a new product. To determine a selling price, the...
Martin Company is considering the introduction of a new product. To determine a selling price, the company has gathered the following information: . Number of units to be produced and sold each year Unit product cost Projected annual selling and administrative expenses Estimated investment required by the company Desired return on investment (ROI) 17,000 $ 50 $ 60,000 $550,000 18% The company uses the absorption costing approach to cost-plus pricing, Required: 1. Compute the markup required to achieve the desired...
Innovation Company is thinking about marketing a new software product. Upfront costs to market and develop the product are $4.97 million. The product is expected to generate profits of $1.19 million per year for ten years. The company will have to provide product support expected to cost $90,000 per year in perpetuity. Assume all profits and expenses occur at the end of the year a. What is the NPV of this investment if the cost of capital is 5.9%? Should...
Innovation Company is thinking about marketing a new software product. Upfront costs to market and develop the product are $4.92 million. The product is expected to generate profits of $1.01 million per year for ten years. The company will have to provide product support expected to cost S93,000 per year in perpetuity. Assume all profits and expenses occur at the end of the year. a. What is the NPV of this investment if the cost of capital is 6.4%? Should...
Your company is considering a $500,000 investment, today, in a new production facility. Production would commence two years from today and initial revenues would be realized at the end of the first year of production. Revenues are estimated to be $300,000 for the first production year, but are expected to fall $30,000 each year thereafter because of a forecasted decline in demand. Meanwhile, operating expenses are incurred at the beginning of each production year and are estimated to be $80,000...
nnovation Company is thinking about marketing a new software product. Upfront costs to market and develop the product are $4.98 million. The product is expected to generate profits of $1.05 million per year for ten years. The company will have to provide product support expected to cost $90,000 per year in perpetuity. Assume all profits and expenses occur at the end of the year. a What s the NPV of this investment if the cost of capital is 6.1%? Should...
3. An investor with a 5-year investment horizon is considering the purchase of 30-year 6%coupon bond selling for $850 and a par value of $1000. The vield to maturity for the bond is 7.2%. Suppose the investor faces a reinvestment rate of 5% per year and anticipates selling the bond in 5 years to yield 6% on the 25-year remaining maturity in 5 years. Calculate his total return from the investment. (17 pt.)
Question 2 25 Marks Kavango Ltd is considering investing in a project at a cost of N$3 000 000. The estimated economic life of the project is 5 years. The company will use the straight-line method to depreciate the cost of the project over 5 years. The company estimates that sales will amount to 240 000 units per year at an estimated selling price of N$40 per unit. The company expects to incur fixed overheads, excluding depreciation of N$300 000...
Martin Company is considering the introduction of a new product. To determine a selling price, the company has gathered the following information: . Number of units to be produced and sold each year Unit product cost Projected annual selling and administrative expenses Estimated investment required by the company Desired return on investment (ROI) 17,000 $ 50 $ 60,000 $550,000 18% The company uses the absorption costing approach to cost-plus pricing, Required: 1. Compute the markup required to achieve the desired...
Most questions answered within 3 hours.
-
You capture data by having 8 people fill in 30 small dots on a
piece of...
asked 3 hours ago -
What are the z-values such that 70% of the area lies in the
middle of the...
asked 5 hours ago -
You borrow $29,500 to purchase a brand new car. The interest
rate is 6%, and the...
asked 4 hours ago -
The amount of time it takes an asteroid, whose average distance
from the Sun is 4.70...
asked 5 hours ago -
A 0.289 kg mass slides on a frictionless floor with a speed of
1.34 m/s. The...
asked 5 hours ago -
15.A box contains five red balls, three green balls, and two
yellow balls. Suppose you select...
asked 7 hours ago -
Assume you are given the following for Stackelberg industries:
Return on Assets (ROA) = 8%
Debt...
asked 6 hours ago -
an engineer proposes to use mmWave in 5G network to
increase data rate.
What are the...
asked 6 hours ago -
Explain the idea behind using SEMIJOIN in distributed
query processing.
asked 6 hours ago -
why
is context important in selecting and applying guidelines and
principles for interface design?
illustrate your...
asked 6 hours ago -
In a certain board game, a player rolls two fair six-sided dice
until the player rolls...
asked 7 hours ago -
You are going to deposit $3,200 in an account that pays .58
percent interest compounded quarterly....
asked 6 hours ago