Considering manufacturing a new style of dress

Assignment Help Financial Management

Reference no: EM131020530

Loco Company is considering manufacturing a new style of dress. The equipment to be used costs $99,000 and would be depreciated to zero by the straight-line method over its 3-year life. It would have a zero salvage value, and no new working capital would be required. Annual revenues are $75,000 and annual operating costs are $25,000. Revenues and operating costs are expected to be constant over the project's 3-year life. However, this project would compete with other Weston's products and would reduce their pre-tax annual cash flows of $5,000. WACC is 10% and corporate tax rate is 35%. What is the project's NPV?

Reference no: EM131020530

Questions Cloud

Minimum probability at which credit can be extended : Cast Iron Company, on each nondelinquent sale, receives revenues with a present value of $1,270 and incurs costs with a value of $1,085. Cast Iron has been asked to extend credit to a new customer. Calculate the minimum probability at which credit ca..

Create the project as if it came from them : I think the scientist has the right to misconduct simply fact cause will experient and create any new project with his or her new ideas and the other will act if they came up with the idea or will steal your ideas and create the project as if it c..

Would the elasticity of demand likely be greater or less : The Energy Information Administration estimated that in 2012 American consumers spent 4 percent of their incomes on gasoline. Would the elasticity of demand likely be greater or less if consumers had spent 8 percent of their incomes on gasoline?

Which dividends are expected to grow at a rate : The last dividend paid by Wilden Corporation was $1.55. The dividend growth rate is expected to be constant at 1.5% for 2 years, after which dividends are expected to grow at a rate of 8.0% forever. The firm's required return (rs) is 11.0%. What is t..

Considering manufacturing a new style of dress : Loco Company is considering manufacturing a new style of dress. The equipment to be used costs $99,000 and would be depreciated to zero by the straight-line method over its 3-year life. It would have a zero salvage value, and no new working capital w..

Equipment after-tax salvage value-capital budgeting analysis : Amigo Gas Co. is selling off some old equipment it no longer needs because its associated project has come to an end. The equipment originally cost $27,500, of which 75% has been depreciated. The firm can sell the used equipment today for $5,000, and..

Where do embryonic stem cells come from : Compare and contrast how embryos/embryonic cells are used in artificial reproductive technologies (ART or in vitro fertilization) versus embryonic stem cell therapy. What is the ultimate objective of ART vs. embryonic stem cell therapy?

What is the best estimate of the current stock price : The last dividend paid by Wilden Corporation was $1.55. The dividend growth rate is expected to be constant at 1.5% for 2 years, after which dividends are expected to grow at a rate of 8.0% forever. The firm's required return (rs) is 11.0%. What is t..

Compute the net present value for each investment : Compute the net present value for each investment. Provide a memo to the management with a recommendation.

User Account

All Pages