Calculate the npv of the project-kol inc

Assignment Help Finance Basics
Reference no: EM133000574

KOL Inc. is considering a 5-year project which requires a $417,000 machine. The CCA rate is 30% and it will be sold for $73,000 when the project ends. The machine is the only asset in the asset class. The project is expected to generate before tax cash ?ows of $285,000 per year for 5 years. The ?rm's target debt-to-equity ratio is 0.8. If the project is ?nanced by all equity, the cost of capital would be 10%. The corporate tax rate is 39%. To ?nance the machine, KOL plans to borrow $285,000 at 4% and to repay one half of the loan at the end of year 2 and the remaining balance at year 5.

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

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

Reference no: EM133000574

Questions Cloud

What is the implied share price of abc : ABC Corporation has total assets of $111.4 million, total liabilities of $78.0 million, Goodwill of 12 million, and 4 millions of shares outstanding.
Calculate the post tax mortgage cost : A family currently live in an apartment whose monthly rent is $950. They are thinking of buying a house which would cost $220,000. They plan to live in this hou
What is the expected rate of return on stock : Mountain stock is expected to earn 18% in a boom, 8% in a normal economy, and lose 2% in a recession economy. The probability of a boom is 20% while the probabi
Prepare general journal entries in relation to bakers ltd : Prepare general journal entries in relation to Bakers Ltd equipment from acquisition date to revaluation date
Calculate the npv of the project-kol inc : KOL Inc. is considering a 5-year project which requires a $417,000 machine. The CCA rate is 30% and it will be sold for $73,000 when the project ends.machi
What would be sukdeev ear : Sukdeev is looking for a mortgage. He goes to the bank and they tell him that the rate is 4% with quarterly payments.
Develop an evidence-based program and evaluation plan : Critically examine and apply the principles and strategies of community and stakeholder engagement and Develop an evidence-based Program and evaluation plan
What the impairment journal would be : At 30 June 2021 the carrying amount of the cruise ships is $12,400,000 and the recoverable was later found to be $5,000,000, the impairment journal would be
How much would yield the lowest amount : How much would yield the lowest amount? One branch of Galssy Company earned an income of P560,000 before bonus and taxes for 2020.

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