Calculate the npv of the project

Reference no: EM13834401

NPV Calculation for Capital BudgetingA project requires an initial investment of $200,000 and expects to produce a cash flow before taxes of 120,000 per year for two years (i.e., cash flows will occur at t = 1 and t = 2). The corporate tax rate is 30%. The assets will depreciate using the MACRS - 3-year schedule: (t = 1, 33%); (t = 2: 45%); (t = 3: 15%); (t = 4: 7%). The company's tax situation is such that it can use all applicable tax shields. The opportunity cost of capital is 12%. Assume that the asset can sell for book value at the end of the project. Calculate the NPV of the project (approximately). Based on your results, please explain in a one page write up whether or not you would accept or reject the investment.

In addition to the required text, provide at least two scholarly references to support your paper. Your paper should be formatted in APA style as outlined in the Ashford Writing Center.

NPV calculation in excel and one page writeup in word can be done.

Reference no: EM13834401

Questions Cloud

Graded on correct financial analysis : CaseCase I is due at the end of this week. Prepare a memo in Word, which answers the questions in the Chapter 2 Case, Cash Flows and Financial Statements at Sunset Boards, Inc., on page 51 of the textbook. Use Excel to solve any financial calculation..

Pick a large merger or acquisition : Pick a large merger or acquisition that occurred sometime between 1/2005 and 9/2014 in an industry that at least one of your group members (groups are assigned the first day of class) is familiar with (this does not need to be limited to U.S. corpora..

A shareholder in a c corporation. : You are a shareholder in a C Corporation. The corporation earns $2.00 per share before taxes. Once it has paid taxes it will distribute the rest of its earnings to you as a dividend. The corporate tax is rate is 40% and the personal tax rate on both ..

A bond issued by general motors : You are considering buying a bond issued by General Motors with exactly 5.5 years remaining to maturity that just paid a coupon yesterday. It rained on your paper this morning so you do not know what the coupon rate is. However you are able to see th..

Calculate the npv of the project : The asset can sell for book value at the end of the project. Calculate the NPV of the project (approximately). Based on your results, please explain in a one page write up whether or not you would accept or reject the investment.

Managers'' desire for job security and firm growth : Managers' desire for job security and firm growth conflict with maximizing value for shareholders. (True, False, Uncertain and explain your response)

A major producer of computer software : Obsolete Computer Systems, Inc. wants to reemerge as a major producer of computer software. The company has two options: Either it can purchase Upstart Software for $25m now whose products are expected to survive 5 years. Or it can develop an ongoing..

Periods of high inflation : During periods of high inflation, U.S. firms have strong incentives to purchase short-lived assets and frequently replace them, rather than investing in long-lived assets. True, False, Uncertain and explain

Financial institution is caught up in a financial scandal : In a minimum of 250 words: If a financial institution is caught up in a financial scandal, would you expect its value to fall by more or less than the amount of any fines and settlement payments?

User Account

All Pages