The Sisyphean Corporation is considering investing in a new cane manufacturing machine that has an estimated life of three years. The cost of the machine is $30,000 and the machine will be depreciated straight line over its three-year life to a residual value of $0. The cane manufacturing machine will result in sales of 2000 canes in year 1. Sales are estimated to grow by 10% per year each year through year three. The price per cane that Sisyphean will charge its customers is $18 each and is to remain constant. The canes have a manufacturing cost of $9 each. Installation of the machine and the resulting increase in manufacturing capacity will require an
The Sisyphean Corporation is considering investing in a new cane manufacturing machine that has an estimated life of three years. The cost of the machine is $30,000 and the machine will be depreciated straight line over its three-year life to a residual value of $0. The cane manufacturing machine will result in sales of 2000 canes in year 1. Sales are estimated to grow by 10% per year each year through year three. The price per cane that Sisyphean will charge its customers is $18 each and is to remain constant. The canes have a manufacturing cost of $9 each. Installation of the machine and the resulting increase in manufacturing capacity will require an
Chapter9: Capital Budgeting And Cash Flow Analysis
Section: Chapter Questions
Problem 5P
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![The Sisyphean Corporation is considering investing in a new cane manufacturing machine that
has an estimated life of three years. The cost of the machine is $30,000 and the machine will
be depreciated straight line over its three-year life to a residual value of $0.
The cane manufacturing machine will result in sales of 2000 canes in year 1. Sales are
estimated to grow by 10% per year each year through year three. The price per cane that
Sisyphean will charge its customers is $18 each and is to remain constant. The canes have a
manufacturing cost of $9 each.
Installation of the machine and the resulting increase in manufacturing capacity will require an](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fbc61a5d7-7e46-42e0-9d49-1ea61d0fa8b1%2Fff421b90-2b3a-4392-ab51-b7ae4f279179%2Fgt46jp_processed.jpeg&w=3840&q=75)
Transcribed Image Text:The Sisyphean Corporation is considering investing in a new cane manufacturing machine that
has an estimated life of three years. The cost of the machine is $30,000 and the machine will
be depreciated straight line over its three-year life to a residual value of $0.
The cane manufacturing machine will result in sales of 2000 canes in year 1. Sales are
estimated to grow by 10% per year each year through year three. The price per cane that
Sisyphean will charge its customers is $18 each and is to remain constant. The canes have a
manufacturing cost of $9 each.
Installation of the machine and the resulting increase in manufacturing capacity will require an
![investment into various net working capital accounts. It is estimated that the Sisyphean
Corporation needs to hold starting year 0:
2% of its next-year sales revenue in cash
4% of its next-year sales revenue in accounts receivable
9% of its next-year sales revenue in inventory
5% of its next-year sales revenue in accounts payable
The firm is in the 21% tax bracket, and has a cost of capital of 10%.
Calculate the NPV of Sisyphean Corporation's new project.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fbc61a5d7-7e46-42e0-9d49-1ea61d0fa8b1%2Fff421b90-2b3a-4392-ab51-b7ae4f279179%2Fi13bhas_processed.jpeg&w=3840&q=75)
Transcribed Image Text:investment into various net working capital accounts. It is estimated that the Sisyphean
Corporation needs to hold starting year 0:
2% of its next-year sales revenue in cash
4% of its next-year sales revenue in accounts receivable
9% of its next-year sales revenue in inventory
5% of its next-year sales revenue in accounts payable
The firm is in the 21% tax bracket, and has a cost of capital of 10%.
Calculate the NPV of Sisyphean Corporation's new project.
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