Calculate the npv of the project

Assignment Help Finance Basics
Reference no: EM133001870

KOL Inc. is considering a 5-year project which requires a $413,000 machine. The CCA rate is 20% and it will be sold for $76,000 when the project ends. The machine is the only asset in the asset class. The project is expected to generate before tax cash flows of $325,000 per year for 5 years. The firm's target debt-to-equity ratio is 0.7. If the project is financed by all equity, the cost of capital would be 11%. The corporate tax rate is 33%. To finance the machine, KOL plans to borrow $279,000 at 6% and to repay one half of the loan at the end of year 3 and the remaining balance at year 5.

Using the adjusted present value method, calculate the NPV of the project.

Using the weighted average cost of capital method, calculate the NPV of the project.

Reference no: EM133001870

Questions Cloud

Segregated fund holder investment : What happens to a segregated fund holder's investment in the event the insurer runs into financial difficulty and becomes insolvent?
What is the interest on a note receivable : What is the interest on a note receivable whose principal amount is $20,000 with an interest rate of 8% that will be paid in 90 days?
What is the cost of borrowing and buying : As a financial analyst for Dorval Construction, you have been asked to recommend the method of financing the acquisition of new equipment needed by the firm.
Calculate the beverage cost percentage : Calculate the beverage cost percentage. Number of Food and Beverage Covers12,000. Cost of Beverages Sold$20,000. Beverage Sales$80,000
Calculate the npv of the project : KOL Inc. is considering a 5-year project which requires a $413,000 machine. The CCA rate is 20% and it will be sold for $76,000 when the project ends. The machi
What are the growth prospects for company : a) In this case, what are the growth prospects for your company, all other things being equal?
What will be the firm cash cycle for freddie fries : An average accounts payable balance of $37,000. Assuming that all of Freddie's sales are on credit, what will be the firm's cash cycle?
What are covenants in a loan agreement : What are covenants in a loan agreement? What are the objectives of covenants? How can these covenants be negative? Positive?
Discuss the relationship between risk and return : Discuss the relationship between risk and return. Argue about what kind of risk preference could add the most value to an investment.

Reviews

Write a Review

Finance Basics Questions & Answers

  Financial reporting and analysis

Finance is about Gunns Ltd, a company in dealing with forestry products in Australia. The company has also been listed in Australian Stock Exchange. As many companies producing forestry products, even Gunns Ltd is facing various problems. Due to the ..

  A report on financial accounting

This report is specific for a core understanding for Financial Accounting and its relevant factors.

  Describe the types of financial ratios

Describe the types of financial ratios and other financial performance measures that are used during venture's successful life cycle.

  Differences between sole proprietorship and corporation

Briefly describe the major differences between a sole proprietorship and a corporation

  Prepare a cash budget statement

Calculate the expected value of the apartment in 20 years' time. What is the mortgage loan repayment at the beginning of each month

  What are the implied interest rates

What are the implied interest rates in Europe and the U.S.?

  State pricing theory and no-arbitrage pricing theory

State pricing theory and no-arbitrage pricing theory

  Small business administration

Identify the likely stage for each venture and describe the type of financing each venture is likely to be seeking and identify potential sources for that financing.

  Effect of financial leverage

The Effect of Financial Leverage and working capital management

  Evaluate the basis for the payment to the lender

Evaluate the basis for the payment to the lender and basis for the payment to the company-counterparty.

  Importance of opps, ipps, mpfs and dmepos

Research and discuss the differences and importance of : OPPS, IPPS, MPFS and DMEPOS.

  Time value of money

Time Value of Money project

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