ABC Corporation has hired you to evaluate a new FOUR year project for the firm. The project will require the purchase of a $ 762,400.00 work cell. Further, it will cost the firm $55,700.00 to get the work cell delivered and installed. The work cell will be straight - line depreciated to zero with a 20-year useful life. The project will require new employees to be trained at a cost of $ 53,300.00. The project will also use a piece of equipment the firm already owns. The equipment has been fully depreciated, but has a market value of $5,100.00. Finally, the firm will invest $10,300.00 in net working capital to ensure the project has sufficient resources to be successful. The project will generate annual sales of $911,000.00 with expenses estimated at 36.00% of sales. Net working capital will be held constant throughout the project. The tax rate is 37.00 %. The work cell is estimated to have a market value of $475,000.00 at the end of the fourth year. The firm expects to reclaim 90.00% of the final NWC position. The cost of capital is 10.00 %. What is the NPV the project if we end the project after 4 years?
ABC Corporation has hired you to evaluate a new FOUR year project for the firm. The project will require the purchase of a $ 762,400.00 work cell. Further, it will cost the firm $55,700.00 to get the work cell delivered and installed. The work cell will be straight - line depreciated to zero with a 20-year useful life. The project will require new employees to be trained at a cost of $ 53,300.00. The project will also use a piece of equipment the firm already owns. The equipment has been fully depreciated, but has a market value of $5,100.00. Finally, the firm will invest $10,300.00 in net working capital to ensure the project has sufficient resources to be successful. The project will generate annual sales of $911,000.00 with expenses estimated at 36.00% of sales. Net working capital will be held constant throughout the project. The tax rate is 37.00 %. The work cell is estimated to have a market value of $475,000.00 at the end of the fourth year. The firm expects to reclaim 90.00% of the final NWC position. The cost of capital is 10.00 %. What is the NPV the project if we end the project after 4 years?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Am. 112.
Transcribed Image Text:ABC Corporation has hired you to evaluate a new FOUR year project for the firm. The project will require the purchase of a $
762,400.00 work cell. Further, it will cost the firm $55,700.00 to get the work cell delivered and installed. The work cell will be
straight - line depreciated to zero with a 20-year useful life. The project will require new employees to be trained at a cost of $
53,300.00. The project will also use a piece of equipment the firm already owns. The equipment has been fully depreciated, but has
a market value of $5,100.00. Finally, the firm will invest $10,300.00 in net working capital to ensure the project has sufficient
resources to be successful. The project will generate annual sales of $911,000.00 with expenses estimated at 36.00% of sales. Net
working capital will be held constant throughout the project. The tax rate is 37.00 %. The work cell is estimated to have a market
value of $475,000.00 at the end of the fourth year. The firm expects to reclaim 90.00% of the final NWC position. The cost of capital
is 10.00 %. What is the NPV the project if we end the project after 4 years?
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