Using the information in the following chart, the NPV of this project is $. ASC, Inc. is considering the production of a new line of soft drinks at its Springfield, IL plant. The CFO of ASC, Inc. is provided with the following information on the new project: ● The expansion will require the immediate purchase of new machinery for $39,000,000. The firm has spent $1,000,000 to train workers to use the new machinery. The incremental sales from this project are expected to be $21,300,000 per year. The incremental operating expenses (excluding depreciation) are expected to equal $11,300,000 per year. The company uses straight-line depreciation. The project has an economic life of 20 years. The machinery has a salvage value of $1,000,000 and will be sold for that amount at the conclusion of the project. The company will increase net working capital by $1,200,000 at the beginning of the project, and it will be liquidated at the end of the project. ASC Inc.'s marginal tax rate is 40%. ASC Inc.'s weighted average cost of capital (WACC) is 14%.

EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN:9781337514835
Author:MOYER
Publisher:MOYER
Chapter9: Capital Budgeting And Cash Flow Analysis
Section: Chapter Questions
Problem 18P
Question
Using the information in the following chart, the NPV of this project is $.
ASC, Inc. is considering the production of a new line of soft drinks at its Springfield, IL plant.
The CFO of ASC, Inc. is provided with the following information on the new project:
●
The expansion will require the immediate purchase of new machinery for $39,000,000.
The firm has spent $1,000,000 to train workers to use the new machinery.
The incremental sales from this project are expected to be $21,300,000 per year. The
incremental operating expenses (excluding depreciation) are expected to equal
$11,300,000 per year.
The company uses straight-line depreciation. The project has an economic life of 20
years. The machinery has a salvage value of $1,000,000 and will be sold for that amount
at the conclusion of the project.
The company will increase net working capital by $1,200,000 at the beginning of the
project, and it will be liquidated at the end of the project.
ASC Inc.'s marginal tax rate is 40%.
ASC Inc.'s weighted average cost of capital (WACC) is 14%.
Transcribed Image Text:Using the information in the following chart, the NPV of this project is $. ASC, Inc. is considering the production of a new line of soft drinks at its Springfield, IL plant. The CFO of ASC, Inc. is provided with the following information on the new project: ● The expansion will require the immediate purchase of new machinery for $39,000,000. The firm has spent $1,000,000 to train workers to use the new machinery. The incremental sales from this project are expected to be $21,300,000 per year. The incremental operating expenses (excluding depreciation) are expected to equal $11,300,000 per year. The company uses straight-line depreciation. The project has an economic life of 20 years. The machinery has a salvage value of $1,000,000 and will be sold for that amount at the conclusion of the project. The company will increase net working capital by $1,200,000 at the beginning of the project, and it will be liquidated at the end of the project. ASC Inc.'s marginal tax rate is 40%. ASC Inc.'s weighted average cost of capital (WACC) is 14%.
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