answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
Natasha2012 [34]
2 years ago
7

We are evaluating a project that costs $2,040,000, has a life of 7 years, and has no salvage value. Assume that depreciation is

straight-line to zero over the life of the project. Sales are projected at 89,700 units per year. Price per unit is $38.67, variable cost per unit is $23.80, and fixed costs are $851,000 per year. The tax rate is 22 percent, and we require a return of 12 percent on this project.
Suppose the projections given for price, quantity, variable costs, and fixed costs are all accurate to within ±10 percent. Calculate the best-case and worst-case NPV figures.
Business
2 answers:
OleMash [197]2 years ago
3 0

Answer: best case Nvp $2,943,304,509.57

Worse case NVP

-$2, 601,609,39

Kruka [31]2 years ago
3 0

Answer:

The best case NPV gives $2,943,309.57  

The worst case NPV gives ($2,601,609.39)

Explanation:

In calculating the NPVs in the attached excel file, the following points should be noted:

Under the best case the +10% is added to price and volume while -10% is applied to costs

Under the worst case NPV -10% is applied to price and volume while +10% was applied to costs

Under both scenarios,depreciation was deducted earlier in order to calculate tax appropriately,but later added to net income in order calculate net cash flows since depreciation is not a cash flow.

In calculating the present of cash flows the pv formula in excel was used.

Finally NPV is present value cash flow less initial investment.

Download xlsx
You might be interested in
Following are forecasts of sales, net operating profit after tax (NOPAT), and net operating assets (NOA) as of December 31, 2017
andreev551 [17]

Answer:

Explanation:

Current Forecast Horizon Terminal

Year ($ millions) 2017 2018 2019 2020 2021 Sales ........................................................$2,785 $3,838 $5,289 $7,288 $10,043 $10,244 ....................................................330 455 627 864 1,190 1,214NOA .........................................................533 735 1,012 1,395 1,922 1,961ROPI Model

NOPAT – [NOABeg× rDiscount

factor [1 / (1 × ] ...................0.88496 0.78315 0.69305 0.61332 Present value of horizon ................342 416 507 619 present value of horizon ........$1,884 Present value of terminal ...............5,375 .........................................................533 Total firm value ........................................$7,792 Less ..............(462) Firm equity value .....................................8,254 Shares outstanding (millions) ..................103.3 Stock value per share ..............................$ 79.90

7 0
1 year ago
1. Using income statement data for Neros, prepare a December income statement dated December 31. 2. If Neros pays a cash dividen
Alenkinab [10]

Answer:

A decision to convert to rental should consider factors such as the taxpayer’s marginal tax rate, availability of excluding gain from the sale of a personal residence, expected growth rate of the rental property, length of time the house will be rented before being sold, cash flow from renting, effect of the passive activity rules, and rate of return on other invested funds.

How rent-to-own investments solve cash flow issues. HomeNews. by Neil Sharma 19 Mar 2019.. and you can redirect that equity to buy rent-to-own properties.". where she explained how a single investor helped seven families become homeowners while cash flowing $60,000 a year.

6 0
1 year ago
Suppose investors can earn a return of 2% per 6 months on a Treasury note with 6 months remaining until maturity. The face value
N76 [4]

Answer:<u> Selling Price = $9803.92</u>

Explanation:

Given:

Treasury bill will provide 2% return in every 6 months.

Time = 6 months

Rate of return = 2% per 6 months

Selling Price of Treasury bill = Face Value / (1 + Rate of Return)^{time period}

Selling Price = $10,000 / (1 + 0.02)^{1}

<u><em>Hence price we would expect a 6-month maturity Treasury bill to sell for is $9803.92</em></u>

5 0
1 year ago
You are a finance intern at Chambers and Sons and they have asked you to help estimate the company's cost of common equity. You
Nesterboy [21]

Answer:

Cost of equity, re= 0.098356 or 9.84 %

Explanation:

D1 = $ 1.25

P0 = $ 27.50

gL = 5 % = 0.05

F = 6 % = 0.06

Cost of equity, re can be calculated using the formular below:

Cost of equity, re = D1/ {P0 x (1- F)} + gL

                             = $ 1.25 / {$ 27.50 x (1- 0.06)} + 0.05

                             = $ 1.25 / ($ 27.50 x 0.94) + 0.05

                             = $ 1.25 / 25.85 + 0.05

                           = 0.048356 + 0.05

Cost of equity, re= 0.098356 or 9.84 %

8 0
1 year ago
The ____ is a type of operational plan that saves managers time because it is created once and then used repeatedly to handle fr
vagabundo [1.1K]

Answer:

a. standing plan

Explanation:

operational plan make a room for strategy plan it give clear picture of the goals to be accomplished as well as the objectives and the task behind it to the personnel in an organization. It is an implementation of strategies.It should be noted that standing plan is a type of operational plan that saves managers time because it is created once and then used repeatedly to handle frequently recurring events.

5 0
1 year ago
Other questions:
  • Which of the following investment choices is least risky?. . A.Flipping. B.Renting. C.CDs. D.Bonds. .
    8·2 answers
  • Larry was accepted at three different graduate schools, and must choose one. Elite U costs $50,000 per year and did not offer La
    11·1 answer
  • Athena Company's salaried employees earn two weeks of vacation per year. It pays $816,400 in total employee salaries for 52 week
    12·1 answer
  • James Smith, the CFO of Blossom Automotive, Inc., is putting together this year's financial statements. He has gathered the foll
    15·1 answer
  • James overspent and will need to spend the next six months paying off his credit card bill. This money was supposed to have gone
    7·2 answers
  • Suppose a piece of plant equipment that PepsiCo put into service on January 1, 2014 at a total cost of $300,000 with an expected
    9·1 answer
  • Nation’s Capital Fitness, Inc. operates a chain of fitness centers in the Washington, D.C., area. The firm’s controller is accum
    13·1 answer
  • "Do we have a loyalty program?" is a question about which of the 5Cs? a. collaborators b. context c. customer d. company
    11·1 answer
  • ABC company had 8,000 in accounts receivable on Dec. 31, 2019. However, the company estimated that 2,000 of them would become ba
    5·1 answer
  • You have decided to undertake a project and have defined the main research question as "what are the opinions of consumers to a
    13·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!