Net present value of this project the following is is based, Ask an Expert

Finance

Net present value of this project:

The following I/S is based on the information associated with a new project. Answer the questions.

Projected Income Statements

		Year
	1	2	3	4
Sales Variable Cost Fixed Cost Depreciation EBIT Taxes (40%) Net income	9,000,000 5,000,000 2,500,000 500,000 1,000,000 400,000 600,000	9,000,000 5,000,000 2,500,000 500,000 1,000,000 400,000 600,000	9,000,000 5,000,000 2,500,000 500,000 1,000,000 400,000 600,000	9,000,000 5,000,000 2,500,000 500,000 1,000,000 400,000 600,000

1) We plan to invest $2,000,000 to get started. In four years, the new equipment will be sold for $100,000. However, its book value will be $0. The tax rate is 50%. Moreover, we can save NWC by $100,000 at the beginning of the life of this project. Fill the blanks in the following projected cash flow table.(60points)

Projected Cash Flows

			Year
	0	1	2	3	4
OCF Changes in NWC Capital spending	( ) -2,000,000	( )	( )	( )	1,100,000 ( ) ( )
Total Cash Flow	( )	( )	( )	( )	( )

2) Figure out the net present value of this project if the required return is 25%. Based on the NPV, do you accept or reject this project? Based on the NPV, is the internal rate of return (IRR) for this project greater or less than the required return of 25%? (You don't have to figure out the IRR. Please think about the relationship between NPV and IRR)

View complete question

Corporate Finance, Finance

Category:- Corporate Finance
Reference No.:- M9521530

Have any Question?Write your Review or question?

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

Recent Questions

Ask Corporate Finance Expert

Finance

Related Questions in Corporate Finance

Assignment - preparing and analyzing a cash budgetselect

Assignment -topic - recent years have seen rapid

Financial and economic interpretation and communication

Questions -1 this week we discuss capital budgeting methods

Ethics and financial services assignment -learning outcome

Question - given1 under armour annual report - you will

Questions -q1 fv of ordinary annuity what is the future

Question - develop a forecast model for sales through

Strategic and financial decision-making referral

Assignment -are you able to produce a report as per the

Ask Experts for help!!

Looking for Assignment Help?

Why might a bank avoid the use of interest rate swaps even

Describe the difference between zero coupon bonds and

Compute the present value of an annuity of 880 per year

Compute the present value of an 1150 payment made in ten

Compute the present value of an annuity of 699 per year

Follow Us