Calculate the best-case and worst-case npv figures

Assignment Help Financial Management
Reference no: EM131528483

We are evaluating a project that costs $924, 000, has a four-year life, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 87, 600 units per year. Price per unit is $34.55, variable cost per un is $20.80, and fixed costs are $756, 000 per year. The tax rate is 35 percent, and we require a return of 13 percent on this project.

Suppose the projections given for price, quantity, variable costs, and fixed costs are all accurate to within plusminus 10 percent. Calculate the best-case and worst-case NPV figures. (A negative answer should be indicated by a minus sign. Enter your answers in dollars, not millions of dollars, e.g. 1, 234, 567. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)

Reference no: EM131528483

Questions Cloud

Disadvantages of monetary targeting and inflation targeting : Compare the advantages and disadvantages of monetary targeting and inflation targeting?
Calculate average collection periods and accounts receivable : Calculate average collection periods and accounts receivable under the old and the new policies.
Makes his first monthly investment today : He makes his first monthly investment today, and he can earn 0.2 percent per month on his investments?
Assume the required return for these bonds : Assume the required return for these bonds will be 10%. Ignore any issue costs paid to bond dealers.
Calculate the best-case and worst-case npv figures : Calculate the best-case and worst-case NPV figures.
True with regard to larger firms except : When considering the best channel to use, all of the following are true with regard to larger firms except they
What is the present value of the cash flow : What is the present value (as of today) of the cash flow that is expected to be made in 10 years from today
What is the expected annual return for his account : Mathew plans to retire in 6 years from today with $1,000,000 in his retirement account. what is the expected annual return for his account?
Define the net present value : CSM Machine Shop is considering a four-year project to improve its production efficiency. Calculate the Net present value

Reviews

Write a Review

Financial Management Questions & Answers

  What must be the coupon rate on bonds

Merton Enterprises has bonds on the market making annual payments, with 14 years to maturity, and selling for $1,086. At this price, the bonds yield to maturity is 6.8 percent. What must be the coupon rate on Merton’s bonds? (Face Value =$1000)

  Capital investment will firm run out of retained earnings

Nolan Corp is trying to determine its weighted average cost of capital. Nolan's current capital structure is: 45% Debt 15% Preferred 40% Common Equity Common Equity. If the firm has $12 Million in retained earnings, at what level of capital investmen..

  What is the yield to maturity of the bonds

Springfield Nuclear Energy Inc. bonds are currently trading at $1,639.76. The bonds have a face value of $1,000, a coupon rate of 10.5% with coupons paid annually, and they mature in 10 years. What is the yield to maturity of the bonds?

  Financial risks-liquidity risk and credit risk

Describe a business practice that would help a company manage each of the following financial risks: Liquidity risk; Credit risk.

  Annuity pays-what is the present value of the annuity

A 10-year annuity pays $2,900 per month, and payments are made at the end of each month. The interest rate is 8 percent compounded monthly for the first six years, and 6 percent compounded monthly thereafter. What is the present value of the annuity?

  What is the breakeven EBIT

Eastern Markets has no debt outstanding and a total market value of $154,000. What is the breakeven EBIT?

  Rate of return from capital appreciation during the year

Francis purchased a stock one year ago for $20, and it is now worth $24. The stock paid a dividend of $3 during the year. What was the stock's rate of return from capital appreciation during the year?

  What is the present value of the cash flows in year

Designs Now is opening a showcase office to display and sell it’s computer designed poster art. what is the present value of the cash flows in year 0?

  What is the yield to maturity of bond

A Japanese company has a bond outstanding that sells for 96 percent of its ¥100,000 par value. The bond has a coupon rate of 6.3 percent paid annually and matures in 19 years. What is the yield to maturity of this bond?

  What will be the required return on your portfolio

You have been managing a $5 million portfolio that has a beta of 0.75 and a required rate of return of 14%. The current risk-free rate is 5.25%. Assume that you receive another $500,000. If you invest the money in a stock with a beta of 0.70, what wi..

  What is this project equivalent annual cost

A five-year project has an initial fixed asset investment of $350,000, an initial NWC investment of $38,000, and an annual OCF of −$37,000. The fixed asset is fully depreciated over the life of the project and has no salvage value. If the required re..

  A local company sells many varieties of shoes

A local company sells many varieties of shoes. For one particular line, the company buys the shoes for $15.00 and sells them for $30.00. If shoes are out of stock, the goodwill cost is estimated to be $5.00 per pair, and the sale is lost. Find the op..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd