Delia Landscaping is considering a new 4-year project. The necessary fixed assets will cost $195,000 and be depreciated on a 3-year MACRS and have no salvage value. The MACRS percentages each year are 33.33 percent, 44.45 percent, 14.81 percent, and 7.41 percent, respectively. The project will have annual sales of $132,000, variable costs of $35,500, and fixed costs of $12,850. The project will also require net working capital of $3,450 that will be returned at the end of the project. The company has a tax rate of 21 percent and the project's required return is 12 percent. What is the net present value of this project? Multiple Choice $22,256 $20,716 $37,403 $25,053 $18,989

Delia Landscaping is considering a new 4-year project. The necessary fixed assets will cost $195,000 and be depreciated on a 3-year MACRS and have no salvage value. The MACRS percentages each year are 33.33 percent, 44.45 percent, 14.81 percent, and 7.41 percent, respectively. The project will have annual sales of $132,000, variable costs of $35,500, and fixed costs of $12,850. The project will also require net working capital of $3,450 that will be returned at the end of the project. The company has a tax rate of 21 percent and the project's required return is 12 percent. What is the net present value of this project? Multiple Choice $22,256 $20,716 $37,403 $25,053 $18,989

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

See similar textbooks

Similar questions

We are evaluating a project that costs $788,400, has a nine-year life, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 75,000 units per year. Price per unit is $52, variable cost per unit is $36, and fixed costs are $750,000 per year. The tax rate is 21 percent, and we require a return of 12 percent on this project. a-1.Calculate the accounting break-even point. (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) a- What is the degree of operating leverage at the accounting break-even point? (Do 2. not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161.) b- Calculate the base-case cash flow and NPV. (Do not round intermediate 1. calculations. Round your cash flow answer to the nearest whole number, e.g., 32. Round your NPV answer to 2 decimal places, e.g., 32.16.) b- What is the sensitivity of NPV to changes in the…
Iron Company is considering a new equipment which will cost $75,000 today. The equipment would be depreciated on a straight-line basis over the project's 3-year life, would have a zero-salvage value, and would require additional net operating working capital of $18,000. The annual sales revenues of the project are $100,000, and annual operating cost except depreciation is $45,000. Revenues and other operating costs are expected to be constant over the project's life. Iron Company tax rate is 35.0% and its cost of capital is 13.35 percent. What is the project's NPV, what the project's MIRR? (MUST show and explain all steps)- Please and thank you!
We are evaluating a project that costs $604,000, has an 8-year life, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 55,000 units per year. Price per unit is $36, variable cost per unit is $17, and fixed costs are $685,000 per year. The tax rate is 21 percent and we require a return of 15 percent on this project. Suppose the projections given for price, quantity, variable costs, and fixed costs are all accurate to within ±10 percent. Calculate the best-case and worst-case NPV figures. (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)
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…
Isle Royale Solutions is considering a project that would have a eight-year life and would require a $2,904,000 investment in equipment. At the end of eight 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.): Use the documents provided in the instructions to determine the appropriate discount factor(s). All of the above items, except for depreciation, represent cash flows. The company's required rate of return is 11%. Compute the project's net present value. Compute the project's internal rate of return. Compute the project's simple rate of return. Compute the project's payback period. Isle Royale Solutions is considering a project that would have a eight-year life and would require a $2,904,000 investment in equipment. At the end of eight years, the project would terminate and the equipment would have no salvage value. The project would provide net operating income…
A Company is considering the development of a plan. The company estimates that the plant and equipment would require an initial of $12 million and sales revenue of $3.0 million a year is expected over the project lifespan of 6 years. The plant and equipment will be fully depreciated using the straight-line method with zero salvage value. Yearly variable costs are $25,000 and fixed costs are $40,000, respectively. The project’s cost of capital is 12% and a corporate tax rate of 30%. Using NPV should this project be undertaken?
Gateway Communications is considering a project with an initial fixed assets cost of $1.63 million that will be depreciated straight-line to a zero book value over the 10-year life of the project. At the end of the project the equipment will be sold for an estimated $233,000. The project will not change sales but will reduce operating costs by $384,000 per year. The tax rate is 24 percent and the required return is 10.8 percent. The project will require $48,500 in net working capital, which will be recouped when the project ends. What is the project's NPV? Multiple Choice $399,054 $367,946 $428,850 $415,017 $351,948
Ursus, Inc., is considering a project that would have a eight-year life and would require a $2,200,000 investment in equipment. At the end of eight 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 $ 2,200,000 Variable expenses 1,450,000 Contribution margin 750,000 Fixed expenses: Fixed out-of-pocket cash expenses $ 250,000 Depreciation 275,000 525,000 Net operating income $ 225,000 Click here to view Exhibit 13B-1 and Exhibit 13B-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 11%. Required: a. Compute the project's net present value. (Round your intermediate calculations and final answer to the nearest whole…
Gateway Communications is considering a project with an initial fixed assets cost of $1.58 million that will be depreciated straight-line to a zero book value over the 9-year life of the project. At the end of the project the equipment will be sold for an estimated $237,000. The project will not change sales but will reduce operating costs by $393,000 per year. The tax rate is 34 percent and the required return is 11.2 percent. The project will require $50,500 in net working capital, which will be recouped when the project ends. What is the project's NPV? Multiple Choice $242,544 $202,140 $250,629 $233,215 $193,351
Gateway Communications is considering a project with an initial fixed assets cost of $1.47 million that will be depreciated straight-line to a zero book value over the 9-year life of the project. At the end of the project the equipment will be sold for an estimated $248,000. The project will not change sales but will reduce operating costs by $415,000 per year. The tax rate is 21 percent and the required return is 12.3 percent. The project will require $56,000 in net working capital, which will be recouped when the project ends. What is the project's NPV? Multiple Choice O $256,094 $584,027 $193,231 $238,300 $247,833
Delia Landscaping is considering a new 4-year project. The necessary fixed assets will cost $171,000 and be depreciated on a 3- year MACRS and have no salvage value. The MACRS percentages each year are 33.33 percent, 44.45 percent, 14.81 percent, and 7.41 percent, respectively. The project will have annual sales of $108,000, variable costs of $27,650, and fixed costs of $12,250. The project will also require net working capital of $2,850 that will be returned at the end of the project. The company has a tax rate of 21 percent and the project's required return is 10 percent. What is the net present value of this project? Multiple Choice $19,125 $28.518 $17,031 $14,520 $15,840
Hoffman company is considering a project that would have a five-year life and require a $3,200,000 investment in equipment. At the end of the five years, the project would terminate and the equipment would have no salvage value. The project would provide the following expected forecasts: Sales $ 5,000,000 Variable expenses $3,000,000 Fixed expenses (including depreciation) $1,600,000 The company’s tax rate is 20% and the WACC is 12% REQUIRED Compute the project’s NPV, IRR, payback period, discounted payback period, and profitability index

SEE MORE QUESTIONS

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS