We project unit sales for a new household-use laser-guided cockroach search and destroy system as follows:Year12345Unit Sales99,000111,000134,000140,00093,000The new system will be priced to sell at $455 each.The cockroach eradicator project will require $1,800,000 in net working capital to start, and total net working capital will rise to 15%of the change in sales. The variable cost per unit is $325, and total fixed costs are $2,100,000 per year. The equipment necessary tobegin production will cost a total of $20 million. This equipment is mostly industrial machinery and thus qualifies for CCA at a rate of20%. In five years, this equipment will actually be worth about 20% of its cost.The relevant tax rate is 35%, and the required return is 19%. Based on these preliminary estimates, what is the NPV of the project?

Net Present Value (NPV) is a financial measure used to analyze the profitability of an investment by…

Answered: We project unit sales for a new…

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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We project unit sales for a new household-use laser-guided cockroach search and destroy system as follows: Year 1 2 3 4 5 The new system will be priced to sell at $465 each. The cockroach eradicator project will require $2,000,000 in net working capital to start, and total net working capital will rise to 15% of the change in sales. The variable cost per unit is $335, and total fixed costs are $2,300,000 per year. The equipment necessary to begin production will cost a total of $21 million. This equipment is mostly industrial machinery and thus qualifies for CCA at a rate of 20%. In five years, this equipment will actually be worth about 20% of its cost. NPV Unit Sales 100,000 112,000 135,000 141,000 94,000 The relevant tax rate is 35%, and the required return is 15%. Based on these preliminary estimates, what is the NPV of the project? (Enter the answer in dollars. Do not round your intermediate calculations. Round the final answer to 2 decimal places. Omit $ sign in your response.)…
If a garden center is considering the purchase of a new tractor with an initial investment cost of $117,000, and the center expects a return of $31,000 in year one, $22,000 in years two and three, $17,000 in years four and five, and $8,000 in year six and beyond, what is the payback period? fill in the blank 1 years
The production department is proposing the purchase of an automatic insertion machine. It has identified 3 machines, each with an estimated life of 10 years. Which machine offers the best internal rate of return? Annual net cash flows Average investment Machine A only Machine B only Machine C only O Machines A and B Machine A $ 50,000 250,000 Machine B $ 40,000 300,000 Machine $ 75,000 500,000
We project unit sales for a new household-use laser-guided cockroach search and destroy system as follows: Year 1 2 3 4 5 NPV Unit Sales 95,500 107,500 130,500 136,500 89,500 The new system will be priced to sell at $420 each. The cockroach eradicator project will require $1,900,000 in net working capital to start, and total net working capital will rise to 15% of the change in sales. The variable cost per unit is $290, and total fixed costs are $1,400,000 per year. The equipment necessary to begin production will cost a total of $17 million. This equipment is mostly industrial machinery and thus qualifies for CCA at a rate of 20%. In five years, this equipment will actually be worth about 20% of its cost. The relevant tax rate is 35%, and the required return is 18%. Based on these preliminary estimates, what is the NPV of the project? (Enter the answer in dollars. Do not round your intermediate calculations. Round the final answer to 2 decimal places. Omit $ sign in your response.)
NPV. Grady Precision Measurement Tools has forecasted the following sales and costs for a new GPS system: annual sales of 45,000 units at $16 a unit, production costs at 37% of sales price, annual fixed costs for production at $200,000. The company tax rate is 38%. What is the annual operating cash flow of the new GPS system? Should Grady Precision Measurement Tools add the GPS system to its set of products? The initial investment is $1,320,000 for manufacturing equipment, which will be depreciated over six years (straight line) and will be sold at the end of five years for $380,000. The cost of capital is 12%. What is the annual operating cash flow of the new GPS system? $ (Round to the nearest dollar.)
Costs associated with the manufacture of miniature high-sensitivity piezoresistive pressure transducers is $85,000 per year. A clever industrial engineer found that by spending $19,000 now to reconfigure the production line and reprogram two of the robotic arms, the cost will go down to $52,000 next year and $58,000 in years 2 through 5. Using an interest rate of 15% per year, determine the present worth of the savings due to the reconfiguration. The present worth of the savings is determined to be $
If a garden center is considering the purchase of a new tractor with an initial investment cost of $127,000, and the center expects a return of $31,000 in year one, $21,000 in years two and three, $15,000 in years four and five, and $12,000 in year six and beyond, what is the payback period? ______ years
You are considering the following project. What is the NPV of the project? WACC of the project: 0.10 Revenue growth rate: 0.05 Tax rate: 0.40 Revenue for year 1: 13,000 Fixed costs for year 1: 3,000 variable costs (% of revenue): 0.30 project life: 3 years Economic life of equipment: 3 years Cost of equipment: 20,000 Salvage value of equipment: 4,000 Initial investment in net working capital: 2,000
HT Bowling, Inc is considering the purchase of VOIP phone system. It will require an initial investment of $29,500 and $9,000 per year in annual operating costs over the equipment's estimated useful life of 4 years. The company will use a discount rate of 11%. What is the equivalent annual cost? $3,460 O $12,623 O $26,810 O $18,509

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