Determining the opportunity cost of capital

Assignment Help Finance Basics
Reference no: EM132465578

Problem: Bottoms Up Diaper Service is considering the purchase of a new industrial washer. It can purchase the washer for $3,600 and sell its old washer for $900. The new washer will last for 6 years and save $1,100 a year in expenses. The opportunity cost of capital is 20%, and the firm's tax rate is 21%.

a. If the firm uses straight-line depreciation over a 6-year life, what are the cash flows of the project in years 0 to 6? The new washer will have zero salvage value after 6 years, and the old washer is fully depreciated. (Negative amounts should be indicated by a minus sign.)

b. What is project NPV? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

c. What is NPV if the firm investment is entitled to immediate 100% bonus depreciation? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Reference no: EM132465578

Questions Cloud

Calculate maximas amount realized : Her cost basis is $10,000; she sold it for $20,000 and paid a commission of $2,400. Calculate Maxima's "amount realized" and "realized gain/loss."
Careful that the number of months is provided : You are interested in buying a house and renting it out. You expect to receive a monthly net income of $1450 from rent. You then expect to sell the house
Determining the annual cash flows : An asset is projected to generate 12 annual cash flows of $7,000 starting 5 years from today. If the discount rate is 11%, how much is this asset worth today?
How much gain and loss will george have to recognize : How much gain/loss will George have to recognize if he uses the FIFO method of accounting for the shares sold?George bought the following amounts of Stock A
Determining the opportunity cost of capital : The new washer will last for 6 years and save $1,100 a year in expenses. The opportunity cost of capital is 20%, and the firm's tax rate is 21%.
Ench 687 - petroleum process economics assignment : ENCH 687 - Petroleum Process Economics Assignment help and solutions:-"university of calgary"Calculate the after tax cash flow
What is the present value of investment : If the opportunity rate is 9.70% per year, what is the present value of this investment? Round to two decimal places
CO4804 Masters Project Assignment : CO4804 Masters Project Assignment Help and Solution, University of Central Lancashire - Assessment Writing Service - summary of what you intend to achieve
Estimate the total cash flows and find out the npv : Estimate the total cash flows and find out the NPV, IRR, and PI of this project.

Reviews

Write a Review

Finance Basics Questions & Answers

  Average return represented

How much money must Regina Redbird have on deposit today at the Normal Credit Union if she wants to be able to withdraw $8,400 at the beginning

  What is the spread in percent

A). What is the spread in percent? B). What are the total expenses for the issue? C). If Dixon Corp. needs to generate $28 million, how many shares will have to be sold?

  Extended increasing interest rate environment

When using a portfolio rate, what would cause the portfolio interest rate on a UL to perform better than the market in an extended declining interest rate

  What is the change in domestic wealth smyrna

a. What is the change in domestic wealth Smyrna experienced during 2007? b. What is the current account balance of Smyrna at the end of 2007?

  Estimate of the population mean water usage

Compute and explain a 95% confidence interval estimate of the population mean water usage per day.

  Define the put-call parity

The price of a share of ABC-Corp stock is currently S0 = $55. Assume that the yearly interest 2%, and that the stock's volatility is 0.4.

  Tactics in running an organization

What is the role of mission, vision, goals, strategies, actions, and tactics in running an organization?

  Determine the lowest rental rate

An equipment rental firm purchased a new scissor lift to add to its rental fleet. The scissor lift cost $15,000 and is expected to have a useful life.

  How many units does the firm need to sell to reach

Its contribution margin (price minus variable cost) for each unit is $30. How many units does the firm need to sell to reach the cash break-even point?

  Impact of repealing the sarbanes oxley act would be

The current administration is trying to roll back many of the previous administration's financial regulations. Although I have not heard any comments.

  Explain how subrogation supports the principle of indemnity

Explain how the principle of subrogation would be relevant in this case. Explain how subrogation supports the principle of indemnity.

  Mr landis president of modern weapons inc was pleased that

mr. landis president of modern weapons inc. was pleased that he had three offers from major companies for his latest

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