NTSThe Sopwith Aviation Company is considering building a new short-range commuter jet, code named 'Sky Streak. The aircraft's engineswill be powered by a new green energy source: high-tension elastomer. The plane will be built in the old, unused S.E.5a assembly facilityin Everett WA. The project is expected to last three years. Selected cash flows for the project are summarized in the table below. Sopwith'stax rate is 34% and its cost of capital is 12%. The NPV of the project is $242.86M.Selected Cash Flows for the 'Sky Streak' Project ($000,000s)YearFree cash flow0-3,50011,18421,25232,371After the first management discussion about Sky Streak, Microsoft has offered to rent the old S.E.5a assembly area to houseprogrammers for its XBOX gaming system. Microsoft has offered rent of $100M per annum (end-of-year). Given this information, what isthe revised NPV for the Sky Streak project? (Express your answer in millions of dollars rounded to two decimal places.)Check Answer

Current NPV= $242.86 millionCost of capital = 13%Tax rate = 34%Annual rent = $100 millionNumber of…

Answered: NTS The Sopwith Aviation Company is…

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

Solve the following show solutions
A proposal is in place to set up a nuclear power plant cooling water filtration project along a river. The benefits (B) are projected to be 10,000 USD per year forever, starting in year 1. The costs (C) are 50,000 USD in year 0 and 50,000 USD at the end of year 2. At 10% annual interest, it this project beneficial? Provide solutions and justifications
不 NPV for varying costs of capital LePew Cosmetics is evaluating a new fragrance-mixing machine. The machine requires an initial investment of $320,000 and will generate cash inflows of $61,850 per year for 8 years. If the cost of capital is 13%, calculate the net present value (NPV) and indicate whether to accept or reject the machine. The NPV of the project is $ (Round to the nearest cent.) Should this project be accepted? (Select the best answer below.) No ○ Yes
2
2
The Sopwith Aviation Company is considering building a new short-range commuter jet, code named 'Sky Streak.' The aircraft's engines will be powered by a new green energy source: high-tension elastomer. The plane will be built in the old, unused S.E.5a assembly facility in Everett WA. The project is expected to last three years. Selected cash flows for the project are summarized in the table below. Sopwith's tax rate is 34% and its cost of capital is 12%. The NPV of the project is $242.86M. Selected Cash Flows for the 'Sky Streak' Project ($000,000s) Year Free cash flow 0 -3,500 1 $ -21.34 X 1,184 2 1,252 3 2,371 After the first management discussion about Sky Streak, Microsoft has offered to rent the old S.E.5a assembly area to house programmers for its XBOX gaming system. Microsoft has offered rent of $90M per annum (end-of-year). Given this information, what is the revised NPV for the Sky Streak project? (Express your answer in millions of dollars rounded to two decimal places.)
A project to control flooding from rare, but sometimes heavy, rainfalls in the arid southwest will have the following cash flow estimates. Determine which project should be selected on the basis of a B/C analysis using an interest rate of 8% per year and a 20-year study period.
Liwayway High School is planning to install solar panels to provide some of the electricity for its groundwater desalting facilty. The project would be done in two phases. The first phase will cost P400 million in year 1 and P500 million in year 2. This investment will result in energy savings (phase 2) of P54,000,000 in year 3, P54,600,000 in year 4, and amounts increasing by P600,000 each year through year 10. Let i = 10% per year.(a) What is the future worth of the savings?(b) Is the cost of the solar project justified by the savings? (Hint: Calculate the difference between savings and cost).
Assume everything is given in n=0, CONSTANT dollars unless otherwise stated: MTA Textile INC. is considering to invest on a computer-controlled fabric cutting machine. The machine’s purchasing price is $150,000. The part of the initial cost of this investment will be paid using a $50,000 loan. The loan will be repaid in yearly installment for four years at 12%. This project requires a working capital investment of $15,000 at year 0. This investment on working capital will be fully recovered after the project is terminated. The salvage value of this investment at the end of fourth years is expected to be $40,000. This machine will generate annual revenues of $55,000, but have annual operating costs of $3,000. The equipment has a 45% declining balance rate for CCA calculations. The marginal income tax rate for the firm is given as 35%. A general inflation rate is expected to be 5%. However, the firm also expects 8% annual increase in revenue and working capital and a 4% annual increase…
An electric utility is considering a photovoltaic (PV) solar panel system to provide power to water conditioning pumps within the power plant. The project will be done in two phases. Phase 1 has an initial cost of $3 million. Phase 2 will cost $2.2 million at the beginning of year 3. The system will be put into service at the beginning of year 4. The annual savings using the PV panels is estimated to be $900,000, increasing by $120,000 per year through year 10. The utility’s Minimum Attractive Rate of Return (MARR) is 10%. 1. Determine if the cost of the PV system is justified. (Hint: Consider comparing the present worth of the costs and present worth of the savings.) 2. What is the actual rate of return for this project?
None
FCF and NPV for a project: Archer Daniels Midland Company is considering buying a new farm that it plans to operate for 10 years. The farm will require an initial investment of $12 million. This investment will consist of $2 million for land and $10 million for trucks and other equipment. The land, all trucks, and all other equipment are expected to be sold at the end of 10 years for a price of $5 million, which is $2 million above book value. The farm is expected to produce revenue of $2 million each year, and annual cash flow from operations equals $1.8 million. The marginal tax rate is 25 percent, and the appropriate discount rate is 10 percent. Calculate the NPV of this investment.

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

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