User Account

All Pages

Compute the net present value of this investment

Assignment Help Accounting Basics
Reference no: EM133182842

Question - Manama Company is considering starting a small serving business. The company would need to purchase a delivery van and various equipment costing $125,000 to equip the business and another $60,000 for working capital needs. Rent for the building used by the business will be $35,000 per year. In addition to the building rent, annual cash outflow for operating costs will amount to $40,000. The company marketing studies indicate that the annual cash inflow from the business will amount to $120,000. All of working capital would be released at the end of 6 years. The company wants to operate the serving business for only six years. The company estimates that the equipment could be sold at that time for $5,000. The company uses a 16% discount rate.

Required -

1. Compute the net present value of this investment.

2. Based on the net present value, do you recommend the business to run, and why?

Reference no: EM133182842

Questions Cloud

Sources of evidence for jcahos hr standards : Describe the four broad processes used to achieve the goals of the HR function as stated by the JCAHO.
What is the operating income of the business in first month : What is the operating income of the business in the first month of operation using the absorption costing method
Evaluating investment alternatives : Jason Heimberg's grandmother died and left him $30,000. Jason, age 20 and single, needed $5,000 of the inheritance to finish his last year at Cosumnes River Col
Research of the new country infrastructure : The purpose of the assignment is to select a market that fits your product as you go international with it, and decide what marketing strategies to follow.
Compute the net present value of this investment : The company estimates that the equipment could be sold at that time for $5,000. Compute the net present value of this investment
Creating a dynamic business environment : You are hired in the newly created position of Director of Communications and you recognize the importance of management strategies on creating dynamic business
Porter five forces and barriers to entry : This question relates to Porter's Five Forces and barriers to entry as part of the Threat of New Entrants discussion. If Virgin Cola wants to re-enter the highl
Develop a preliminary data collection guide : How can one develop a preliminary data collection guide for a qualitative analysis on the topic" "How do Human Resource professionals approach the implementatio
Find the children food choices : Describe the typical patterns that you would expect to find in the children's food choices. Use this information to prepare a list of 20 nutritious food items t

Reviews

Write a Review

Accounting Basics Questions & Answers

  How much control does fed have over this longer real rate

Hubbard argues that the Fed can control the Fed funds rate, but the interest rate that is important for the economy is a longer-term real rate of interest.   How much control does the Fed have over this longer real rate?

  Coures:- fundamental accounting principles

Coures:- Fundamental Accounting Principles: - Explain the goals and uses of special journals.

  Accounting problems

Accounting problems,  Draw a detailed timeline incorporating the dividends, calculate    the exact Payback Period  b)   the discounted Payback Period. the IRR,  the NPV, the Profitability Index.

  Theory of interest - term structure of interest rates

Term Structure of Interest Rates

  Write a report on internal controls

Write a report on Internal Controls

  Prepare the bank reconciliation for company

Prepare the bank reconciliation for company.

  Cost-benefit analysis

Create a cost-benefit analysis to evaluate the project

  Theory of interest

Theory of Interest: NPV, IRR, Nominal and Real, Amortization, Sinking Fund, TWRR, DWRR

  Liquidity and profitability

Distinguish between liquidity and profitability.

  What is the expected risk premium on the portfolio

Your Corp, Inc. has a corporate tax rate of 35%. Please calculate their after tax cost of debt expressed as a percentage. Your Corp, Inc. has several outstanding bond issues all of which require semiannual interest payments.

  Simple interest and compound interest

Simple Interest, Compound interest, discount rate, force of interest, AV, PV

  Capm and venture capital

CAPM and Venture Capital

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!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

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