Wettway Sailboat Corporation is considering whether to launch its new Margo-classsailboat. The selling price will be $41,000 per boat. The variable costs will be about halfthat, or $20,000 per boat, and fixed costs will be $465,000 per year.The total investment needed to undertake the project is $3,100,000. This amount will bedepreciated straight-line to zero over the 5-year life of the equipment. The salvage valueis zero, and there are no working capital consequences. Wettway has a required returnof 11 percent on new projects.FC +OCF-TCX D1-TCP-vUse the above expression to find the cash, accounting, and financial break-even pointsfor Wettway Sailboat. Assume a tax rate of 21 percent. (Do not round intermediatecalculations and round your answers to 2 decimal places, e.g., 32.16.)Cash break-evenAccounting break-evenFinancial break-even

Break even point is where there is no loss and no profit and only all costs are covered and profit…

Answered: Corporati onsidering Margo-class…

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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Dog Up! Franks is looking at a new sausage system with an installed cost of $385,000. This cost will be depreciated straight-line to zero over the project's five-year life, at the end of which the sausage system can be scrapped for $60,000. The sausage system will save the firm $135,000 per year in pretax operating costs, and the system requires an initial investment in net working capital of $35,000. If the tax rate is 21 percent and the discount rate is 10 percent, what is the NPV of this project? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) NPV
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Ursus, Incorporated, is considering a project that would have a five-year life and would require a $2,400,000 investment in equipment. At the end of five years, the project would terminate and the equipment would have no salvage value. The project would provide net operating income each year as follows (Ignore income taxes.): Sales $ 3,500,000 Variable expenses 2,100,000 Contribution margin 1,400,000 Fixed expenses: Fixed out-of-pocket cash expenses $ 600,000 Depreciation 480,000 1,080,000 Net operating income $ 320,000 Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using the tables provided. All of the above items, except for depreciation, represent cash flows. The company's required rate of return is 14%. Required: a. Compute the project's net present value. (Round your intermediate calculations and final answer to the nearest whole dollar amount.) b. Compute the project's internal rate of…
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ang Enabled Ex Jessica's at Boulder jewelry store is considering expanding its operations. The expansion will require new equipment costing $651,000 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 $169,000 at the end of the project. The project requires $39,000 initially for net working capital, which will be recovered at the end of the project. The operating cash flow (pre-tax) will be $165,300 a year. What is the net present value of this project if the relevant discount rate is 13 percent and the tax rate is 35 percent? -$29.866 -$25,031 -$27812 -$32.962 -$35,498
The ABC Ltd is analysing the costs and benefits of setting up an extra fast-food outlet in Adelaide. The predicted costs and income flows are provided below: $2 million site acquisition and development costs. The capital depreciation expense is $50,000 per year. Investment in plant and equipment of $600,000. The plant and equipment have an estimated useful life of 5 years and the residual value would be zero. The plant and equipment will be depreciated on a straight-line basis for tax purposes. The forecasted sales in year 1 is $600,000 and $800,000 per year thereafter. Labour and material costs are equivalent to 50 per cent of incremental sales. The policy (objective) is to sell the outlet at the end of year 3. The estimated selling price is $3.5 million. Sales in a similar outlet of ABC Ltd will decline by $80,000 per year due to loss of customers and experienced staff to the new venture. Other operating costs are about $150,000 per year (fixed) The net working capital requirement at…

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