Year 1 2 Revenues $ 60,000 40,000 Saved 3 4 Thereafter 30,000 10,000 0 Expenses are expected to be 30% of revenues, and working capital required in each year is expected to be 10% of revenues in the following year. The product requires an immediate investment of $81,000 in plant and equipment. Required: ok nt ences a. What is the initial investment in the product? Remember working capital. b. If the plant and equipment are depreciated over 4 years to a salvage value of zero using straight-line depreciation, and the firm tax rate is 20%, what are the project cash flows in each year? c. If the opportunity cost of capital is 10%, what is project NPV? d. What is project IRR? Complete this question by entering your answers in the tabs below. Req A Req B Req C and D c. If the opportunity cost of capital is 10%, what is project NPV? Note: A negative value should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 2 decimal places. d. What is project IRR? Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. c. NPV d. IRR % < Req B Reg C and D Show less A
Year 1 2 Revenues $ 60,000 40,000 Saved 3 4 Thereafter 30,000 10,000 0 Expenses are expected to be 30% of revenues, and working capital required in each year is expected to be 10% of revenues in the following year. The product requires an immediate investment of $81,000 in plant and equipment. Required: ok nt ences a. What is the initial investment in the product? Remember working capital. b. If the plant and equipment are depreciated over 4 years to a salvage value of zero using straight-line depreciation, and the firm tax rate is 20%, what are the project cash flows in each year? c. If the opportunity cost of capital is 10%, what is project NPV? d. What is project IRR? Complete this question by entering your answers in the tabs below. Req A Req B Req C and D c. If the opportunity cost of capital is 10%, what is project NPV? Note: A negative value should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 2 decimal places. d. What is project IRR? Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. c. NPV d. IRR % < Req B Reg C and D Show less A
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
Related questions
Question
Transcribed Image Text:Year
1
2
Revenues
$ 60,000
40,000
Saved
3
4
Thereafter
30,000
10,000
0
Expenses are expected to be 30% of revenues, and working capital required in each year is expected to be 10% of revenues in the
following year. The product requires an immediate investment of $81,000 in plant and equipment.
Required:
ok
nt
ences
a. What is the initial investment in the product? Remember working capital.
b. If the plant and equipment are depreciated over 4 years to a salvage value of zero using straight-line depreciation, and the firm
tax rate is 20%, what are the project cash flows in each year?
c. If the opportunity cost of capital is 10%, what is project NPV?
d. What is project IRR?
Complete this question by entering your answers in the tabs below.
Req A
Req B
Req C and D
c. If the opportunity cost of capital is 10%, what is project NPV?
Note: A negative value should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 2
decimal places.
d. What is project IRR?
Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.
c. NPV
d. IRR
%
< Req B
Reg C and D
Show less A
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