Shinoda Manufacturing, Incorporated, has been considering the purchase of a new manufacturing facility for $540,000. The facility is to be fully depreciated on a straight- line basis over seven years. It is expected to have no resale value at that time. Operating revenues from the facility are expected to be $410,000, in nominal terms, at the end of the first year. The revenues are expected to increase at the inflation rate of 2 percent. Production costs at the end of the first year will be $255,000, in nominal terms, and they are expected to increase at 3 percent per year. The real discount rate is 5 percent. The corporate tax rate is 25 percent. Calculate the NPV of the project. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) NPV
Shinoda Manufacturing, Incorporated, has been considering the purchase of a new manufacturing facility for $540,000. The facility is to be fully depreciated on a straight- line basis over seven years. It is expected to have no resale value at that time. Operating revenues from the facility are expected to be $410,000, in nominal terms, at the end of the first year. The revenues are expected to increase at the inflation rate of 2 percent. Production costs at the end of the first year will be $255,000, in nominal terms, and they are expected to increase at 3 percent per year. The real discount rate is 5 percent. The corporate tax rate is 25 percent. Calculate the NPV of the project. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) NPV
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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