Considering new three-year expansion project

Assignment Help Financial Management
Reference no: EM131580218

Sextet Corporation is considering a new three-year expansion project that requires an initial fixed asset investment of $2.94 million. The fixed asset is classified as a five-year asset under MACRS for taxes and will be depreciated straight-line to zero over the three-year project life for book accounting. At the end of the project, Sextet believes the asset can be sold for $800,000. The project is estimated to generate $2,160,000 in annual sales, with annual costs of $855,000. Net working capital for the project is expected to be $425,000. The tax rate is 34 percent and the required return on the project is 10 percent. What is the project’s NPV? (Enter your answer in dollars, not millions of dollars, e.g. 1,234,567. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Reference no: EM131580218

Questions Cloud

CAPM required return for both stocks-Sigma and Omega : Calculate the CAPM required return for both stocks. Sigma: Omega. Calculate the excess return, alpha, for both stock. Sigma: Omega:
Write a paper of a health care career of your choice : Write a paper of a health care career of your choice. Why did you chose to research this career?
Find the average value of the function : Find the average value (b) of the function whose equation is f(x) = ex-3x over the interval [1, 2].
Describe difference between vision and mission statement : Describe the difference between a vision statement and a mission statement. What is the purpose of each statement?
Considering new three-year expansion project : Sextet Corporation is considering a new three-year expansion project that requires an initial fixed asset investment of $2.94 million.
Should acme replace or renovate the existing line : The alternative to investing in the new production line is to overhaul the existing line, Should ACME replace or renovate the existing line
How much free cash flow-expected to generate over next year : how much free cash flow (FCF) is Dernham inc. expected to generate over the next year?
Chief knowledge officer to an organization : In this individual project, you will function in the capacity of Chief Knowledge Officer to an organization, either accessible or researched.
Which statements is true regarding business mindset : Which of the following statements is true regarding business mindset? _____ audit the financial reports of public companies as required by law.

Reviews

Write a Review

Financial Management Questions & Answers

  What is the NPV and payback period of investment

Riggs, Inc. management is planning to spend $650,000 on a new marketing campaign. They estimate this will result in additional cash flows of $325,000 over the next three years. If the cost of capital is 17.5 percent, what is the NPV of this investmen..

  What are the current restocking costs

The Trektronics store begins each week with 220 phasers in stock. This stock is depleted each week and reordered. The carrying cost per phaser is $17 per year and the fixed order cost is $32. What are the current total carrying costs? What are the cu..

  Affect the business risk of a firm-optimal capital structure

Which of the following does NOT affect the business risk of a firm? According to the trade off model of capital structure, which is true at the optimal capital structure? The Price Co. can make widgets for $5 and sell them for $8. If fixed costs are ..

  The firm required net working capital

The machine will also immediately lower the firm’s required net working capital by $95,000.

  Find line item listed on either the income statement

Find a line item listed on either the income statement or balance sheet that would indicate an adjusting entry was necessary and describe the entry. For under armour And What do you think the effect would be on the company's financial statements if t..

  Project projected IRR can be less than the WACC

Warr Company is considering a project that has the following cash flow data. What is the project's IRR? Note that a project's projected IRR can be less than the WACC or negative, in both cases it will be rejected. Year 0 1 2 3 4 Cash flows -$1,575 $4..

  Which is expected to increase at an average rate

Enrite Gas recently paid a $4.75 annual dividend on its common stock, which is expected to increase at an average rate of 3.5% per year. If the stock is currently trading for $39.33 per share, what is its market rate of return?. Town Bagel common sto..

  What is the yield-to-maturity of the bonds

Facade Securities has an issue of $1,000 par value bonds with 18 years remaining to maturity. The bonds pay 7.7% interest on a semiannual basis. The current market price of the bonds is $1,175. What is the yield-to-maturity of the bonds?

  About the invested funds

Your uncle has $500,000 and wants to retire. He expects to live for another 30 years and to earn 6.5% on his invested funds. How much could he withdraw at the end of each of the next 30 years and end up with zero in the account?

  What is the cost of common stock for whitewall

Whitewall Tire Co. just paid an annual dividend of $1.20 on its common shares. If Whitewall is expected to increase its annual dividend by 2.10 percent per year into the foreseeable future and the current price of Whitewall’s common shares is $15.09,..

  Most appropriate for an aggressive? investor

An investor is considering purchasing one of the following three stocks. Stock X has a market capitalization of ?$99 ?billion, pays a relatively high dividend with little increase in? earnings, and has a? P/E ratio of 1111. Stock Y has a market capit..

  Calculate the irr of investing in the new machine

Calculate the IRR of investing in the new machine and advise whether it is financially acceptable

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