An all-equity firm has a 20% operating margin, a 0% tax rate, and a 10% hurdle. The one period project’s base case NPV = $2,000. What is the impact on NPV if the operating margin remains the same and sales are $200 higher than base case?
An all-equity firm has a 20% operating margin, a 0% tax rate, and a 10% hurdle. The one period project’s base case NPV = $2,000. What is the impact on NPV if the operating margin remains the same and sales are $200 higher than base case?
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
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- An all-equity firm has a 20% operating margin, a 0% tax rate, and a 10% hurdle. The one period project’s base case
NPV = $2,000. What is the impact on NPV if the operating margin remains the same and sales are $200 higher than base case?
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The NPV of a project is used to find out the profitability of a project based on a required rate of return. It is one of the most used tools of capital budgeting and is used by investors in decision-making regarding investments.
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