Answer in typing Ivashina Enterprises is considering a new project. The project will require $307,985 for new fixedassets, $150,121 for additional inventory, and $34,409 for additional accounts receivable. Accountspayable are expected to increase by $81,416. Long-term debt is expected to increase by $241,168.The project has a 5-year life. The fixed assets will be depreciated straight-line to a zero book valueover the project's life. At the end of the project, the fixed assets can be sold for 20% of their originalcost. The net working capital returns to its original level at the end of the project. The project isexpected to generate sales of $811,916 and costs of $685,551 yearly over the project's life. The taxrate is 32%, and the required rate of return is 14%.What is the NPV of the project? Round your responses to two decimal points. Do not include the $sign.

Concept. Net present value is capital budgeting technique used for making investment decisions. It…

Answered: ashina Enterprises is considering a new…

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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Solar Wind is considering a new project. The project will require $325,000 for new fixed assets and $195,000 for additional inventory. Long-term debt is expected to increase by $300,000. The project has a 5-year life. The fixed assets will be depreciated straight-line to a zero book value over the life of the project. At the end of the project, the fixed assets can be sold for 25% of their original cost. All inventory is expected to be recovered at the end of the project. The project is expected to generate annual sales of $565,000 and costs before depreciation of $302,000. The tax rate is 35%, and the required rate of return is 15%. The company has other ongoing profitable operations. In the field specified below, provide your answer to the following question: What is the MIRR of the project? For any credit, show all work in your Excel worksheet. In a new Excel worksheet, a) Answer the questions below and b) Place the company name at the top of the page. c) Use this information…
A proposed three-year project will require $589,000 for fixed assets, $79,000 for inventory, and $43,000 for accounts receivable. Accounts payable are expected to increase by $47,000. The fixed assets will be depreciated straight-line to a zero book value over five years. No bonus depreciation will be taken. At the end of the project, the fixed assets can be sold for $225,000. The net working capital returns to its original level at the end of the project. The operating cash flow per year is $67,900. The tax rate is 20 percent and the discount rate is 12 percent. What is the total cash flow in the final year of the project?
South Side, Inc., is considering opening a branch in another state. The operating cash flow will be $185,000 a year. The project will require new equipment costing $495,000 that would be depreciated on a straight-line basis to zero over the 5-year life of the project. The equipment will have a market value of $95,000 at the end of the project. The project requires an initial investment of $110,000 in net working capital, which will be recovered at the end of the project. The tax rate is 28 percent. What is the project's IRR? Enter your answer as a whole number rounded to three decimal places, i.e., enter 5.123% as 5.123.
Cirice Corp. is considering opening a branch in another state. The operating cash flow will be $187,600 a year. The project will require new equipment costing $613,000 that would be depreciated on a straight- line basis to zero over the 5-year life of the project. The equipment will have a market value of $191,000 at the end of the project. The project requires an initial investment of $44,500 in net working capital, which will be recovered at the end of the project. The tax rate is 35 percent. What is the project's IRR? Multiple Choice 19.80% 14.59% 16.96% 19.86% 18.18%
Cirice Corp. is considering opening a branch in another state. The operating cash flow will be $181,400 a year. The project will require new equipment costing $568,000 that would be depreciated on a straight-line basis to zero over the 4-year life of the project. The equipment will have a market value of $161,000 at the end of the project. The project requires an initial investment of $37,000 in net working capital, which will be recovered at the end of the project. The tax rate is 34 percent. What is the project's IRR?9.65%12.98%14.61%
Bruin Building Supply is considering expansion. Operating cash flow will be $710,000 a year. The project will require new equipment costing $1,850,000 that would be depreciated on a straight-line basis to zero over the 5-year life of the project. The equipment will have a market value of $370,000 at the end of the project. The project requires an initial investment of $525,000 in net working capital, which will be recovered at the end of the project. The tax rate is 28.00 percent. What is the project's IRR? Answer in whole numbers, rounded to three decimal places.
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Alpha Zeta is considering purchasing some new equipment costing $390,000. The equipment will be depreciated on a straight line basis to zero book value over the four year life of the project. Projected net income for the four years is $18,900; $21,300; $26,700; and $25,000. What is the average accounting rate of return?
The Whilst Co. is analyzing a project that has projected sales of $189,400 and costs of $102,300. The project requires an investment in inventory of $15,000 plus another $28,000 in accounts receivable. Fixed assets of $80,000 are needed and will be depreciated straight-line over 5 years. Accounts payable will increase by $36,000. An interest expense of $11,000 will be incurred annually. The project has a life of 3 years. At the end of the three years, the equipment has an estimated market value of $26,000. The company requires a 14% rate of return and is in the 34% marginal tax bracket. What is the net present value of this project? $65,887 $68,023 $88,671 $91,425 None of the above.
Keene, Inc. is considering a new five-year expansion project that requires an initial fixed asset investment of $3.0 million. The fixed asset will be depreciated using on a straight-line basis to zero over its five year life. The fixed asset will have a market value of $350,000 at the end of the project. The project requires an initial investment in net working capital of $325,000. The working capital will be recovered at the end of the project’s life. The project is estimated to generate $2,250,000 in annual sales, with costs of $750,000. The tax rate is 35 percent. What is the free cash flow in year 1 (FCF1) on this project? a. $1,575,000 b. $975,000 c. $900,000 d. $1,500,000 e. $1,185,000

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