The data required for a new investment are calculated as follows: Cost of the investment: 10.000.000 $ Cost of capital (discount rate): 25% Economic life of the investment: 5 years Tax rate: 40% Normal depreciation method is applied. What will be the net present value of the investment if the depreciation and pre-tax profit  that the company expects from the investment every year for 5 years is 7,000,000 $?

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A: Average investment = (Initial investment+ salvage value)/2 = (900000+300000)/2 = $600000

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A: Formulas that are used:-

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A: The objective of this question is to calculate the expected accounting rate of return (ARR) for a…

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Q: The present value index for this investment is Oa. 0.95 Ob. 1.00 Oc. 1.05 Od. 1.25

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A: SOLUTION-   FORMULA- PRESENT VALUE = FUTURE VALUE * 1 / (1+INTEREST RATE ) ^TIME PERIOD .

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A:

Q: A firm must decide between two designs A and B. Their effective income rate is 50%. If the desired…

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Q: Suppose that annual income from a rental property is expected to start at $1.250 per year and…

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Q: Chase Brew Inc is considering an investment with the following information: initial…

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Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.