TABLE 4 You are considering a new product launch: Equipment for the project will cost $875,000 The project will have a four-year life, and have no salvage value. Depreciation is straight-line to zero over the four years. The required return on the project is 11%, and the tax rate is 35%. Projected annual sales and cost figures are shown below (sales a Based on the information given, calculate OCF and NPV Equipment cost Project length (years) Required return Tax rate $82 $3,9 $2,8 $3 Annual Sales Annual Variable costs Annual Fixed costs Annual Depreciation Annual EBIT Annual Taxes Annual OCF Cash flows YEAR 3
TABLE 4 You are considering a new product launch: Equipment for the project will cost $875,000 The project will have a four-year life, and have no salvage value. Depreciation is straight-line to zero over the four years. The required return on the project is 11%, and the tax rate is 35%. Projected annual sales and cost figures are shown below (sales a Based on the information given, calculate OCF and NPV Equipment cost Project length (years) Required return Tax rate $82 $3,9 $2,8 $3 Annual Sales Annual Variable costs Annual Fixed costs Annual Depreciation Annual EBIT Annual Taxes Annual OCF Cash flows YEAR 3
Chapter10: Capital Budgeting: Decision Criteria And Real Option
Section10.A: Mutually Exclusive Investments Having Unequal Lives
Problem 2P
Related questions
Question
Checking work.
Find All Blank
Transcribed Image Text:TABLE 4
You are considering a new product launch:
Equipment for the project will cost $875,000
The project will have a four-year life, and have no salvage value.
Depreciation is straight-line to zero over the four years.
The required return on the project is 11%, and the tax rate is 35%.
Projected annual sales and cost figures are shown below (sales and costs are estimated to be identical for each year 1-4)
Based on the information given, calculate OCF and NPV
Equipment cost
Project length (years)
Required return
$875,000
4
11%
Tax rate
35%
Annual Sales
Annual Variable costs
$3,948,000
$2,869,000
$345,000
Annual Fixed costs
Annual Depreciation
Annual EBIT
Annual Taxes
Annual OCF
Cash flows
YEAR
3
4
PROJECT NPV
"you MUST use NPV function in excel
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 1 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:
9781337514835
Author:
MOYER
Publisher:
CENGAGE LEARNING - CONSIGNMENT
Managerial Accounting: The Cornerstone of Busines…
Accounting
ISBN:
9781337115773
Author:
Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:
Cengage Learning
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:
9781337514835
Author:
MOYER
Publisher:
CENGAGE LEARNING - CONSIGNMENT
Managerial Accounting: The Cornerstone of Busines…
Accounting
ISBN:
9781337115773
Author:
Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:
Cengage Learning
Fundamentals Of Financial Management, Concise Edi…
Finance
ISBN:
9781337902571
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Intermediate Financial Management (MindTap Course…
Finance
ISBN:
9781337395083
Author:
Eugene F. Brigham, Phillip R. Daves
Publisher:
Cengage Learning
Managerial Accounting
Accounting
ISBN:
9781337912020
Author:
Carl Warren, Ph.d. Cma William B. Tayler
Publisher:
South-Western College Pub