Question 15 ptsAtlantic Manufacturing is considering a new investment project that will last for four years. The delivered and installed cost of the machine needed for the project is $23,163 and it will be depreciated accordingto the three-year MACRS schedule. The project also requires an initial increase in net working capital of $302. Financial projections for sales and costs are in the table below. In addition, since sales are expectedto fluctuate, NWC requirements will also fluctuate. The end-of-year NWC requirements are included below (hint: these NWC capital requirements DO NOT represent the change in NWC for the period). The $0requirement for NWC at the end of year 4 means that all NWC is recovered by the end of the project. The corporate tax rate is 35% and the required return on the project is 12%.Year1234Sales$11,178$12,030$13,342$10,583Costs2,3482,8103,2751,042NWC3233522170RequirementsWhat is the project's NPV? (Round answer to 2 decimal places. Do not round intermediate calculations).Topic: Capital Budgeting Problem

The problem requires the determination of the NPV. Net Present Value or NPV refers to the difference…

Answered: Question 1 5 pts Atlantic Manufacturing…

EBK CFIN

6th Edition

ISBN:9781337671743

Author:BESLEY

Publisher:BESLEY

Chapter9: Capital Budgeting Techniques

Section: Chapter Questions

Problem 12PROB

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QUESTION 13 A project requires an initial investment in equipment of $81,000 and then requires an initial investment in working capital of $19,000 (at t = 0). You expect the project to produce sales revenue of $100,000 per year for three years. You estimate manufacturing costs at 60% of revenues. (Assume all revenues and costs occur at year-end, i.e., t-1, t-2, and t= 3.) The equipment depreciates using straight-line depreciation over three years. At the end of the project, the firm can sell the equipment for $20,000 and recover the investment in net working capital. The corporate tax rate is 30% and the cost of capital is 15%. Calculate the NPV of the project: O $3,840. $4,122.46. $-2,735. $7,342.
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Question 1 Aguilera Acoustics, Inc. (AAI), projects unit sales for a new seven-octave voice emulation implant as follows: Year Unit Sales 1 8300 2 9200 3 10400 4 9800 5 8400 Production of the implants will require GH¢ 150,000 in net working capital to start and additional net working capital investments each year equal to 15 percent of the projected sales for that year. In the final year of the project, net working capital will decline to zero as the project is wound down. In other words, the investment in working capital is to be completely recovered by the end of the project’s life. Total fixed costs are GH¢ 240,000 per year, variable production costs are GH¢ 190 per unit, and the units are priced at GH¢ 345 each. The equipment needed to begin production has an installed cost of GH¢ 2,300,000. Because the implants are intended for professional singers, this equipment depreciated using the straight-line basis. In five years, this equipment…
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QUESTION 1 Frank Einstein Co. is a firm that specializes in selling Halloween decorations. It is evaluating a new project that requires an initial investment of $1.42 million. The asset will be depreciated to zero over its 3-year life. The company's analysts estimate that in the first year, the project will generate $1.09 million in revenues. The revenue will increase by 7% per year in the following two years. The costs in the first year will be $475,000 and they will increase by 5% per year thereafter. The corporate tax rate is 25% and the required return is 12%. What is the NPV of the project?
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