Computing the irr for the project

Reference no: EM131883839

Question: 1. (Project Evaluation ) Dog up! Frank is looking at a new sausage system with an installed cost of $560000.this cost will be depreciated straight-line to zero over the project 's five-year life, at the end of which the sausage system can be scrapped for$85000.the sausage system will save the firm $165000per year in pretax operating costs ,and the system requires an initial investment in net working capital of $29000.if the tax rate is 34 percent and the discount rate id 10percent, what is the npv of this project?

2. (Project Evaluation) your firm is contemplating the purchase of a new $720,000 computer-based order entry system. The system will be depreciated straight -line to zero over its 5year life. it will be worth $75,000at the end of that time. you will save $260,000 before taxes per year in order processing costs , and you will be able to reduce working capital by$110,000(this is a one-time reduction). if the tax rate is 35percent , what is the IRR fir this project?

3. In the previous problem, suppose your required return on the project is 20percent and your pretax cost saving s are $300,000per year. Will you accept the project? what if the pretax cost saving are $240,000per year? At what level of pretax cost savings would you be indifferent between accepting the project and not accepting it?

Reference no: EM131883839

Questions Cloud

Difference between growing annuity and growing perpetuity : What is net working capital? Why a low value for number might be considered Undesirable? What is the difference between growing annuity and growing perpetuity.

Explain author current view on chosen organization theory : This Journal discusses the term of "deep dive" when it comes to government organizational structure. Explain author current view on chosen organization theory

Prepare the income statement using variable costing : Hank Company manufactures and sells one product. Sales and production information is contained below.

Payment of share dividend on the share price : What are the consequences of the payment of a share dividend on the share price?

Computing the irr for the project : (Project Evaluation ) Dog up! Frank is looking at a new sausage system with an installed cost of $560000.this cost will be depreciated straight-line.

Examine the casualty insurance policy : The prepaid insurance account shows a debit of $6,000, representing the cost of a 2-year casualty insurance policy dated September 1 of the current year.

Develop scope statement for project : The city of Greendale wants to contract with your company to build a new baseball stadium. Develop a scope statement for this project.

How do public accountants differ from management accountants : How do public accountants differ from management accountants? Who are the key users of the accounting information?

What is receivables float : Name at least two different types of inventory valuation methods. Discuss the advantages and disadvantages of each method.

User Account

All Pages