QUESTION 17 Firm X builds a low-cost product. Due to overseas competition, the firm is going to expand its line of products and introduce a new p Cost of new equipment 190,000 Installation cost of equipment $40,000 Life of equipment 5 years, Swaight line depreciation Expected sales: $170,000 per year Expected reduction in sales gmeric product as customers shift to the new line: $10,000 per year Raw material cost $90,000 per year New worker salary: $20,000 per year Required Not working capital over t Expected Salvage value of equipment Tax rate: 35% Assuming a WACC of 13%, what is this project's NPV? Oa-5,068 Ob.6610 Oc. 12,703 O d. 17,756 Oe. 25,294 life of the project: $20,000 at the end of 5 year: $30,000 tails of the investment
QUESTION 17 Firm X builds a low-cost product. Due to overseas competition, the firm is going to expand its line of products and introduce a new p Cost of new equipment 190,000 Installation cost of equipment $40,000 Life of equipment 5 years, Swaight line depreciation Expected sales: $170,000 per year Expected reduction in sales gmeric product as customers shift to the new line: $10,000 per year Raw material cost $90,000 per year New worker salary: $20,000 per year Required Not working capital over t Expected Salvage value of equipment Tax rate: 35% Assuming a WACC of 13%, what is this project's NPV? Oa-5,068 Ob.6610 Oc. 12,703 O d. 17,756 Oe. 25,294 life of the project: $20,000 at the end of 5 year: $30,000 tails of the investment
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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QUESTION 17
Firm X builds a low-cost product. Due to overseas competition, the firm is going to expand its line of products and introduce a new premium line. Below are the details of the investment.
Cost of new equipment: $90,000
Installation cost of equipment: $40,000
O a.-5,068
O b.6,610
O c. 12,703
O d. 17,756
O e. 25,294
Assuming a WACC of 13%, what is this project's NPV?
QUESTION 18
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Q
Life of equipment: 5 years, Straight line depreciation
Expected sales: $170,000 per year
• Expected reduction in sales generic product as customers shift to the new line: $10,000 per year
A
Raw material cost: $90,000 per year
New worker salary: $20,000 per year
Required Networking capital over the life of the project: $20,000
Expected Salvage value of equipment at the end of 5 year: $30,000
Tax rate: 35%
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