The technique for calculating a bid price can be extended to many other types ofproblems. Answer the following questions using the same technique as setting a bidprice; that is, set the project NPV to zero and solve for the variable in question. MartinEnterprises needs someone to supply it with 155,000 cartons of machine screws peryear to support its manufacturing needs over the next five years, and you've decided tobid on the contract. It will cost $1,950,000 to install the equipment necessary to startproduction; you'll depreciate this cost straight-line to zero over the project's life. Youestimate that, in five years, this equipment can be salvaged for $165,000. Your fixedproduction costs will be $280,000 per year, and your variable production costs shouldbe $10.90 per carton. You also need an initial investment in net working capital of$145,000. The tax rate is 25 percent and you require a return of 14 percent on yourinvestment. Assume that the price per carton is $17.50.a. Calculate the project NPV. (Do not round intermediate calculations and round youranswer to 2 decimal places, e.g., 32.16.)b. What is the minimum number of cartons per year that can be supplied and still breakeven? (Do not round intermediate calculations and round your answer to thenearest whole number, e.g., 32.)c. What are the highest fixed costs that could be incurred and still break even? (Do notround intermediate calculations and round your answer to 2 decimal places, e.g.,32.16.)a. NPVb. Minimum cartonsc. Highest fixed costs.

The technique for calculating a bid price can be extended to many other problems. Answer the following questions using the same technique as settin price; that is, set the project NPV to zero and solve for the variable in question Enterprises needs someone to supply it with 155,000 cartons of machine scr year to support its manufacturing needs over the next five years, and you've de bid on the contract. It will cost $1,950,000 to install the equipment necessary production; you'll depreciate this cost straight-line to zero over the project's estimate that, in five years, this equipment can be salvaged for $165,000. Yo production costs will be $280,000 per year, and your variable production costs be $10.90 per carton. You also need an initial investment in net working ca $145,000. The tax rate is 25 percent and you require a return of 14 percent investment. Assume that the price per carton is $17.50. a. Calculate the project NPV. (Do not round intermediate calculations and rour answer to 2 decimal places, e.g., 32.16.)

The technique for calculating a bid price can be extended to many other problems. Answer the following questions using the same technique as settin price; that is, set the project NPV to zero and solve for the variable in question Enterprises needs someone to supply it with 155,000 cartons of machine scr year to support its manufacturing needs over the next five years, and you've de bid on the contract. It will cost $1,950,000 to install the equipment necessary production; you'll depreciate this cost straight-line to zero over the project's estimate that, in five years, this equipment can be salvaged for $165,000. Yo production costs will be $280,000 per year, and your variable production costs be $10.90 per carton. You also need an initial investment in net working ca $145,000. The tax rate is 25 percent and you require a return of 14 percent investment. Assume that the price per carton is $17.50. a. Calculate the project NPV. (Do not round intermediate calculations and rour answer to 2 decimal places, e.g., 32.16.)

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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You are evaluating a project for The Ultimate recreational tennis racket, guaranteed to correct that wimpy backhand. You estimate the sales price of The Ultimate to be $340 per unit and sales volume to be 1.000 units in year 1. 1.250 units in year 2, and 1,325 units in year 3. The project has a 3-year life. Variable costs amount to $195 per unit and fixed costs are $100,000 per year. The project requires an initial investment of $147,000 in assets, which can be depreciated using bonus depreciation. The actual market value of these assets at the end of year 3 is expected to be $29,000 NWC requirements at the beginning of each year will be approximately 20 percent of the projected sales during the coming year. The tax rate is 21 percent and the required return on the project is 11 percent. (Use SL depreciation table) What will the cash flows for this project be? Note: Negative amounts should be indicated by a minus sign. Round your answers to 2 decimal places. Year Total cash flow 0
A project will increase revenue from $3.6 million to $4.4 million. Wages are 30% of revenue. Maintenance on the machine will be $47,000 more than it is on the machine that will be replaced. What are the incremental expenses (i.e. change in combined wages and maintenance costs) that will result from accepting this project? (Hint: This is tricky. Read the question carefully to be sure you understand exactly what this question is asking for.) Question 5Answer a. $0.800 million b. $0.287 million c. $0.193 million d. $0.560 million
Briefly review the sensitivity analysis that is presented in the case exhibits. Under what circumstances is this project financially attractive? What bets were the company making when they went ahead with the project? DO NOT HAVE TO PERFORM YOUR OWN SENSITIVITY ANALYSIS. YOU ARE TO INTERPRET THE SENSITIVITY ANALYSIS THAT IS GIVEN.
Typed please Please provide a quality solution for better ratings and take care of plagiarism also
You are evaluating a project for The Farpour golf club, guaranteed to correctthat nasty slice. You estimate the sales price of The Tiff-any to be $400 per unitand sales volume to be 1000 units in year 1; 1500 units in year 2; and 1325units in year 3. The project has a three-year life. Variable costs amount to $225per unit and fixed costs are $100,000 per year. The project requires an initialinvestment of $165,000 in assets which will be depreciated straight-line to zeroover the three-year project life. The actual market value of these assets at theend of year 3 is expected to be $35,000. NWC requirements at the beginning ofeach year will be approximately 20 percent of the projected sales during thecoming year. The tax rate is 34 percent and the required return on the project is10 percent. What change in NWC occurs at the end of year 1?
You are evaluating a project for The Farstroke golf club, guaranteed to correct that nasty slice. You estimate the sales price of The Farstroke to be $490 per unit and sales volume to be 1,200 units in year 1; 1,125 units in year 2; and 1,000 units in year 3. The project has a 3-year life. Variable costs amount to $270 per unit and fixed costs are $100,000 per year. The project requires an initial investment of $138,000 in assets, which can be depreciated using bonus depreciation. The actual market value of these assets at the end of year 3 is expected to be $26,000. NWC requirements at the beginning of each year will be approximately 30 percent of the projected sales during the coming year. The tax rate is 21 percent and the required return on the project is 11 percent. What is the operating cash flow for the project in year 2? Note: Enter your answer as a whole number. Operating cash flow
need answer in step by step
Barker Production Company is considering the purchase of a flexible manufacturing system. The annual cash benefits/savDecreased waste$ 75,000Increased quality100.000Decrease in operating costs62,500Increase in on-time deliveries12.500The system will cost S750,000 and will last ten years. The company's cost of capital is 10%.What is the payback period for the flexible manufacturing system?What is the NPV for the flexible manufacturing system?
You are evaluating a project for The Farstroke golf club, guaranteed to correct that nasty slice. You estimate the sales price of The Farstroke to be $400 per unit and sales volume to be 1,000 units in year 1; 1,500 units in year 2; and 1,325 units in year 3. The project has a 3-year life. Variable costs amount to $225 per unit and fixed costs are $100,000 per year. The project requires an initial investment of $165,000 in assets, which can be depreciated using bonus depreciation. The actual market value of these assets at the end of year 3 is expected to be $35,000. NWC requirements at the beginning of each year will be approximately 20 percent of the projected sales during the coming year. The tax rate is 21 percent and the required return on the project is 10 percent. What change in NWC occurs at the end of year 1?
Manshukh
You are evaluating a project for The Ultimate recreational tennis racket, guaranteed to correct that wimpy backhand. You estimate the unit sales price of The Ultimate to be $500 and sales volume to be 1,000 units in year 1; 1,250 units in year 2, and 1,450 units in year 3. The project has a three-year life. Variable costs amount to $225 per unit and fixed costs, excluding depreciation, are $110,000 per year. The project requires an initial investment of $170,000 which is depreciated straight-line to zero over the three-year project life. The expected scrap value of the asset at the end of year 3 is $35,000. Networking capital investment is initially lowered by $80,000 and it will be fully replaced at the end of the project’s life. The tax rate is 34% and the required return on the project is 10%. What is the NPV of this project? Accordingly, what is your decision?
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