Economic life using the straight-line method

Assignment Help Financial Management

Reference no: EM131012545

Howell Petroleum is considering a new project that complements its existing business. The machine required for the project costs $3.87 million. The marketing department predicts that sales related to the project will be $2.57 million per year for the next four years, after which the market will cease to exist. The machine will be depreciated down to zero over its four-year economic life using the straight-line method. Cost of goods sold and operating expenses related to the project are predicted to be 30 percent of sales. Howell also needs to add net working capital of $220,000 immediately. The additional net working capital will be recovered in full at the end of the project’s life. The corporate tax rate is 35 percent. The required rate of return for Howell is 13 percent.

Reference no: EM131012545

Questions Cloud

Determine the maximum value of pmax : The pin has a diameter of d = 0.375 in., and each side of the pulley support bracket has a thickness of t = 0.1875 in. The average shear stress in the pin cannot exceed 45 ksi, and the bearing stress in the pulley support bracket cannot exceed 60 ..

What nurse practitioners can do to enact the change : This paper is a proposal for change paper, meaning how and what Nurse Practitioners (a leader) can do to enact the change. You will see a list of change theories, you have to select a change theory and use it as a framework for the change you want..

What vertical force does the water exert onto the fitting : A pump conveys water from an open pond through a short length of pipe to a nozzle that shoots water into the air in the middle of a fountain. The pump adds 5 H.P. to the flow. What vertical force (direction and magnitude) does the water exert onto..

Where each of the following items appears : Identify the financial statement[s] where each of the following items appears. Use I for income statement, E for statement of retained earnings, and B for balance sheet.

Economic life using the straight-line method : Howell Petroleum is considering a new project that complements its existing business. The machine required for the project costs $3.87 million. The marketing department predicts that sales related to the project will be $2.57 million per year for the..

Calculate book-market values of firms stockholders equity : Ava’s SpinBall Corp. lists fixed assets of $16 million on its balance sheet. The firm’s fixed assets have recently been appraised at $24 million. Ava’s SpinBall Corp.’s balance sheet also lists current assets at $9 million. Calculate the book and mar..

Paper on a current issue in healthcare : Write a 5-10 page paper on a current issue in healthcare related to a personal interest area or personal view of a healthcare issue or concern. Pros and Cons of the issue through a literature search with APA guidelines followed

Depreciated over four years using the straight-line method : Scott Investors, Inc., is considering the purchase of a $371,000 computer with an economic life of four years. The computer will be fully depreciated over four years using the straight-line method. The market value of the computer will be $71,000 in ..

How many gallons of water need to flow from the upper tank : Assuming an average head loss of 15% in the pipeline, and 80% conversion efficiency for the turbine/generator, how many gallons of water need to flow from the upper tank to the pond to supply the daily energy requirement for the cabin?

User Account

All Pages