Cash flow amount to use as initial investment in fixed asset

Assignment Help Financial Management
Reference no: EM131526854

Parker & Stone, Inc., is looking at setting up a new manufacturing plant in South Park to produce garden tools. The company bought some land six years ago for $5.8 million in anticipation of using it as a warehouse and distribution site, but the company has since decided to rent these facilities from a competitor instead. If the land were sold today, the company would net $6.1 million. The company wants to build its new manufacturing plant on this land; the plant will cost $13.3 million to build, and the site requires $850,000 worth of grading before it is suitable for construction. What is the proper cash flow amount to use as the initial investment in fixed assets when evaluating this project? (Enter your answer in dollars, not millions of dollars, e.g. 1,234,567.)

Reference no: EM131526854

Questions Cloud

The three economic scenarios before any debt is issued : Calculate earnings per share (EPS) under each of the three economic scenarios before any debt is issued.
Four-year project to improve its production efficiency : Purple Haze Machine Shop is considering a four-year project to improve its production efficiency.
Determine the equivalent taxable yield : Determine the equivalent taxable yield.
Considering purchase of new machine for production of latex : Vandalay Industries is considering the purchase of a new machine for the production of latex.
Cash flow amount to use as initial investment in fixed asset : What is the proper cash flow amount to use as the initial investment in fixed assets when evaluating this project?
What is the current yield on bonds-effective annual yield : What is the current yield on the bonds? The YTM? The effective annual yield?
What is total dollar return that garrity earned during year : What is the total dollar return that Garrity earned during the year? Compute the yield (percent return) associated with the investment for the year.
Considering three-year expansion project-initial fixed asset : Quad Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2.6 million. T
Cash flow expectations have not changed despite the increase : Cash flow expectations have not changed despite the increase in uncertainty.

Reviews

Write a Review

Financial Management Questions & Answers

  What is the expected standard deviation of the portfolio

What is the expected return from a portfolio containing the two securities if 40 percent of your wealth is invested in Jones and 60 percent is invested in Bush?

  Show calculations to receive full credit

Analysis of past monthly movements in IBM's stock price produces the following estimates: α = 2.5% and β = 1.6. If the market index subsequently rises by 12% in one month and IBM's stock price increases by 20%, what is the abnormal change in IBM's st..

  What is your effective annual rate of return

You’ve just opened a margin account with $20,000 at your local brokerage firm. You instruct your broker to purchase 850 shares of Landon Golf stock, which currently sells for $99 per share. What is your total dollar return from this investment? What ..

  What is the value of debt in the firm and value of equity

Consider a firm that has assets worth $1,000,000 today. It has a single zero-coupon debt issue with face value $800,000 and a time-to-maturity of five years. What is the risk-neutral probability that the firm will survive to T = 5? What is the value ..

  How do you explain the rise in the yield on these bonds

Suppose that 3 years ago you purchased from the government of Eldorado 5-year saving bonds at a yield to maturity of 4%. However, currently as two years remain to maturity, they are trading at a yield of 20%. Assuming that the interbank rate in Eldor..

  Changes in the net working capital

Changes in the net working capital: A. can affect the cash flows of a project every year of the project's life. B. only affect the initial cash flows of a project. C. are included in project analysis only if they represent cash outflows. D. are gener..

  What will be the net gain and loss for the investor

The September T-bond futures contract is currently selling at 111-05 and September call option on T-bond futures for a strike price of 115-00 is currently quoting at 2-24. If an investor purchases one contract of the call option at the current market..

  Official reserves transaction balance was negative

During the Vietnam War years the U.S. official reserves transaction balance was negative and U.S. reserve assets declined. With the fixed exchange rate system during those years, the United States was able to run a deficit on current account because ..

  Calculate the owners break-even probability

Assume costs of fan irritation from the lockout is equal to owners’ next best alternative, calculate the owners’ break-even probability.

  What is the value of the original forward contract now

Consider a long position in a 6-month forward contract on a 1-year coupon bond with a 8% quarterly coupon. (Note: The bond has 1-year to maturity as of t=0). Assume a face value of $1 million. Use the discount factors for August 15, 2000 in Table 5.9..

  A firm credit policy consists

A firm's credit policy consists of which of the following items?

  Risk swift manufacturing is evaluating asset purchase

Assessing return and risk Swift Manufacturing is evaluating an asset purchase.

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