More Capital Project

Initial Equipment $65,000 Project Life 3 Years Sales $55,000 Variable Costs $25,000 Fixed Costs $ 10,000 Tax rate 26% Cost of Capital 10% Ending Book Value $10,000 Sales Price at Year 3 $5,000 Net Working Capital $10,000 CALCULATE THE INITIAL COSTS, CALCULATE THE OPERATING CASH FLOW, CALCULATE THE TERMINAL NON OPERATING CASH FLOW, CALCULATE THE NPV. please show your work and formulus for the answers

The following information is available about an investment opportunity:   Initial Capital Expenditure                     $3 Million   Annual Sales (in units)                             100,000   Selling price per unit                              $50   Cost per unit                                           $20   Project life                                               3 years   Salvage value                                            $0   Depreciation                                         Straight line, over life of the project   Tax rate                                                    35%   WACC                                                   20%   Initially the project requires an increase in net working capital of $600,000, but it will be recovered after the project’s life.    Calculate NPV:

Compute the NPV based on the following data             Life of project                10.00  year  Required Investment       500,000.00   Required Rate of Return   8%   Required Working Capital to be released at the end of the project       35,000.00   Salvage value of equipment at end of year 10       12,000.00   Required overhaul in year 5         60,000.00   Annual increase in net income for this project       85,000.00             Year Cash flow     0       1       2       3       4       5       6       7       8       9       10               Net Present Value       IRR             Should we accept this project:?

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2. Calculating Project NPV The Fleming Company is considering a new investment. Financial projections for the investment are tabulated below. The corporate tax rate is 22 percent. Assume all sales revenue is received in cash, all operating costs and income taxes are paid in cash, and all cash flows occur at the end of the year. All net working capital is recovered at the end of the project. Investment Sales revenue Operating costs Depreciation Net working capital spending Year 0 $32,800 450 Year 1 Year 2 Year 3 Year 4 $14,200 2,100 8,200 175 $15,900 $15,700 2,100 2,100 8,200 8,200 250 275 $12,900 2,100 8,200 ? a. Compute the incremental net income of the investment for each year. b. Compute the incremental cash flows of the investment for each year. c. Suppose the appropriate discount rate is 12 percent. What is the NPV of the project?

You are evaluating projects 1 and 2.  The projects have the following yearly operating profit.  Depreciation expense is $2,000 per year for each project.  Assume a 10% required rate of return. Project 1                      Project 2 Year 1                                      $ 3,370                        $ 8,000 Year 2                                      $ 3,500                        $ 8,000 Year 3                                      $ 4,100                        $ 8,000 Year 4                                      $ 4,270                        $ 8,000 Year 5                                      $ 4,620                        $ 8,000 Investment                              $ 18,000                      $ 33,200   Required: Using Net Present Value analysis, please answer the following questions: Assuming you had $100,000 to invest, which investment would you make, if any, and why? Assuming you had $35,000 to invest, which investment would you make, if any, and why?   PV factors…

You are evaluating projects 1 and 2.  The projects have the following yearly operating profit.  Depreciation expense is $2,000 per year for each project.  Assume a 10% required rate of return. Project 1                      Project 2 Year 1                                      $ 3,370                        $ 8,000 Year 2                                      $ 3,500                        $ 8,000 Year 3                                      $ 4,100                        $ 8,000 Year 4                                      $ 4,270                        $ 8,000 Year 5                                      $ 4,620                        $ 8,000 Investment                              $ 18,000                      $ 33,200   Required: Using Average Rate of Return, which project, if any, would you evaluate further and why? Using Net Present Value analysis, please answer the following questions: Assuming you had $100,000 to invest, which investment would you make, if any, and why? Assuming…

Calculate the NPV of Project A using the below information: Project period: 5 Years Amount paid for research: $10,500 Cost of equipment: $150,000 (Depreciation method: Straight line for 5 years) Annual savings from this project A: $55,500 Cost of Capital: 12% Tax rate: 38% a. $4,634.80 b. -$25,959.65 C. $15,134.80 d. -$36,459.65 U: 0.0 kB/s D: 0.3kBls rch DELL

2 Laurman, Inc. is considering the following project: 4 Required investment in equipment 5 Project life 6 Salvage value 7 8 The project would provide net operating income each year as follows: 9 Sales 10 Variable expenses 11 Contribution margin 12 Fised expenses: 13 Salaries, rent and other fixed out-of pocket costs 14 Depreciation 15 Total fixed expenses 16 Net operating income. 17 18 Company discount rate $2,205,000 7 225,000 $2,750,000 1,600,000 $1,150,000 $520,000 350,000 870,000 $280.000 18% D N 19 20 Required: 21 22 23 (Use cells A4 to C18 from the given information, as well as 824, and A30 to D45 to complete this question. Negative amounts or amounts to be deducted should be input as negative values and will display in parentheses.) 24 1. Compute the annual net cash inflow from the project. $630,000 25 26 2. Complete the table to compute the net present value of the investment. 27 28 Year(s) 29 Now 152,205,000.00) 1 through 7 30 Initial investment 31 Annual cost savings 32…

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Required information A company that manufactures magnetic flow meters expects to undertake a project that will have the cash flows estimated. First cost, $ Equipment replacement cost in year 2, $ Annual operating cost, $/year Salvage value, $ Life, years -880,000 -300,000 -930,000 250,000 14 At an interest rate of 10% per year, what is the equivalent annual cost of the project? Find the AW value using tabulated factors The equivalent annual cost of the project is $- 980,731.95

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