Andronicus Corporation has the following jumbled information about an investment proposal: a. Revenues in each of years 1-4 = $36,000 b. Year O initial investment = $56,000 c. Inventory level = $18,000 in year 1, $20,100 in year 2, and $13,000 in d. Production costs = $11,800 in each of years 1-4 e. Salvage value = $13,600 in year 4 f. Depreciation = 100% immediate bonus depreciation g. Tax rate = 21% h. Customers pay with a 6-month lag year 3 Draw up a set of cash flow forecasts as in Table 6.4. If the cost of capital is 10%, what is the project's NPV? Assume that, if the project generates losses, those losses can be used to offset profits elsewhere in the business. Note: Do not round your intermediate calculations. Round your final answer to the nearest whole dollar amount. NPV
Andronicus Corporation has the following jumbled information about an investment proposal: a. Revenues in each of years 1-4 = $36,000 b. Year O initial investment = $56,000 c. Inventory level = $18,000 in year 1, $20,100 in year 2, and $13,000 in d. Production costs = $11,800 in each of years 1-4 e. Salvage value = $13,600 in year 4 f. Depreciation = 100% immediate bonus depreciation g. Tax rate = 21% h. Customers pay with a 6-month lag year 3 Draw up a set of cash flow forecasts as in Table 6.4. If the cost of capital is 10%, what is the project's NPV? Assume that, if the project generates losses, those losses can be used to offset profits elsewhere in the business. Note: Do not round your intermediate calculations. Round your final answer to the nearest whole dollar amount. NPV
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Andronicus Corporation has the following jumbled information about an investment proposal:
a. Revenues in each of years 1-4 = $36,000
b. Year O initial investment = $56,000
c. Inventory level = $18,000 in year 1, $20,100 in year 2, and $13,000 in
d. Production costs = $11,800 in each of years 1-4
e. Salvage value = $13,600 in year 4
f. Depreciation = 100% immediate bonus depreciation
g. Tax rate = 21%
h. Customers pay with a 6-month lag
year
3
Draw up a set of cash flow forecasts as in Table 6.4. If the cost of capital is 10%, what is the project's
NPV? Assume that, if the project generates losses, those losses can be used to offset profits
elsewhere in the business.
Note: Do not round your intermediate calculations. Round your final answer to the nearest whole
dollar amount.
NPV
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