A firm is considering a nine-year project that requires an initial investment in fixed assets of $630. The fixed asset will be depreciated straight line to zero over the life of the project. At the end of the project the asset will be sold for $180. The project is expected to generate $950 in annual sales with annual cost of goods sold of $400. The tax rate is 30% and the discount rate is 10%. Find the net present value of the project.
A firm is considering a nine-year project that requires an initial investment in fixed assets of $630. The fixed asset will be depreciated straight line to zero over the life of the project. At the end of the project the asset will be sold for $180. The project is expected to generate $950 in annual sales with annual cost of goods sold of $400. The tax rate is 30% and the discount rate is 10%. Find the net present value of the project.
Financial And Managerial Accounting
15th Edition
ISBN:9781337902663
Author:WARREN, Carl S.
Publisher:WARREN, Carl S.
Chapter26: Capital Investment Analysis
Section: Chapter Questions
Problem 2CMA: Staten Corporation is considering two mutually exclusive projects. Both require an initial outlay of...
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A firm is considering a nine-year project that requires an initial investment in fixed assets of $630. The fixed asset will be
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Step 1
NPV(Net Present Value) is excess of present values(PV) of cash inflows over initial outflow of a proposed project. It is calculated by discounting all cash flows to current time with required rate or WACC.
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