A three -year project will cost 60000 to construct this

Assignment Help Corporate Finance

Reference no: EM13380665

A three -year project will cost $60,000 to construct. This will be depreciated straight-line to zero over the three-year life. The price per unit sold is $20 and the variable cost per unit sold is $10. Fixed costs are $30,000 per year.

a. If you expect to sell 7000 units per year, what is the OCF in year 2 assuming a required return of 15% and a tax rate of 30%

b. You now find that a salvage company will pay you $10,000 for the assets at the end of year 3. The project will require an investment of $10,000 up front for net working capital. If you expect to sell 7000 units per year, compute the NPV. Assume a required return of 15% and a tax rate of 30%.

c. Disregard information in b. You now expect the number of units sold to be 7000 with an upper bound of 8000 and a lower bound of 6000 and you expect the variable cost per unit to be $10 per unit with an upper bound of $12.50 and a lower bound of $7.50. Assuming a tax rate of 30%, compute the IRR for the best case. Assume that salvage is $0 and NWC is $0. Compute the cash break-even point.

Compute DOL if quantity sold is 7000.

Reference no: EM13380665

Questions Cloud

Your grandmother just died and left you 132500 in a trust : your grandmother just died and left you 132500 in a trust fund that pays 6.5 interest. you must spend the money on your

Magellen industries is analyzing a new project the data : magellen industries is analyzing a new project. the data they have gathered to date is as followsinitial requirement

Surgico a manufacturer of consumer plastic products is : surgico a manufacturer of consumer plastic products is evaluating its capital structure. the balance sheet of the

The managers of ponchoparts inc plan to manufacture engine : the managers of ponchoparts inc. plan to manufacture engine blocks for classic cars from the 1960s era. they expect

A three -year project will cost 60000 to construct this : a three -year project will cost 60000 to construct. this will be depreciated straight-line to zero over the three-year

Question 1you own a rental building in the city and are : question 1you own a rental building in the city and are interested in replacing the heating system. you are faced with

A what is the change in the net working capital from 2005 : a. what is the change in the net working capital from 2005 to 2006?b. what is the amount of the noncash expenses for

Questionthe table below shows hypothetical values in : questionthe table below shows hypothetical values in billions of dollars.a. use the table to calculated the m1 and m2

1 explain the role the government plays in personal finance : 1 explain the role the government plays in personal finance focus on regulations laws economic policy etc..2 explain

User Account

All Pages