Considering the purchase of new manufacturing facility

Assignment Help Financial Management

Reference no: EM13871561

Sanders Enterprises, Inc., has been considering the purchase of a new manufacturing facility for $289,000. The facility is to be fully depreciated on a straight-line basis over seven years. It is expected to have no resale value after the seven years. Operating revenues from the facility are expected to be $124,000, in nominal terms, at the end of the first year. The revenues are expected to increase at the inflation rate of 3 percent. Production costs at the end of the first year will be $49,000, in nominal terms, and they are expected to increase at 4 percent per year. The real discount rate is 6 percent. The corporate tax rate is 34 percent. Sanders has other ongoing profitable operations. Calculate the NPV of the project.

Reference no: EM13871561

Questions Cloud

Dieland company issues : On January 1, Dieland Company issues a $20,000 non interest bearing, 5 year note for equipment.

Zero coupon bonds have more reinvestment risk : 10-year, zero coupon bonds have more reinvestment risk than 10-year, 10% coupon bonds. A 10-year, 10% coupon bond has less reinvestment risk than a 10-year, 5% coupon bond (assuming all else equal). The price of a 20-year, 10% bond is less sensitive ..

Expenditures for each nonmajor fund rationale : Details of the year, expenditures for each nonmajor fund Rationale for including component units as part of the reporting entity Current year, revenues, expenditures, and changes in fund balance for the General Fund

Formulate the hypotheses statement : Formulate the hypotheses statement

Considering the purchase of new manufacturing facility : Sanders Enterprises, Inc., has been considering the purchase of a new manufacturing facility for $289,000. The facility is to be fully depreciated on a straight-line basis over seven years. The real discount rate is 6 percent. The corporate tax rate ..

Write the null and alternative hypothesis : Determine whether the statement is true or false. If it is false, rewrite it as a true statement - Write the null and alternative hypothesis. Identify which is the claim.

Compute the eac for both machines : You are evaluating two different silicon wafer milling machines. The Techron I costs $261,000, has a three-year life, and has pretax operating costs of $70,000 per year. use straight-line depreciation to zero over the project’s life and assume a salv..

What make crossborder financial statement analysis difficult : What makes cross-border financial statement analysis difficult? What alternatives does an MNC have when investors in a foreign country demand accounting and financial information?

Do you agree with the court ruling why or why not : The basic facts of the case including the state, city, and whether the original trial court was a state or federal court, The legal issue(s) the court dealt with in the case, The court's ultimate legal ruling in the case and Do you agree with the cou..

User Account

All Pages