Evaluate new project with the npv method

Assignment Help Finance Basics
Reference no: EM132638316

ABC Ltd is considering a new project with a 5-year lifespan that will likely generate earnings before interest & tax (EBIT) of $20,000 per year. The project requires an initial investment of $100,000 in equipment, which will be depreciated based on the straight-line method with no residual values at the end (year 5). The operation will require additional investment in working capital of $20 000, which will be recovered at the end of the project (year 5). The interest expense will be $10,000 per year. Please evaluate this new project with the NPV method if the tax rate is 35% and the cost of capital is 15%.

Reference no: EM132638316

Questions Cloud

Data storage management : We manipulate more digital data than we ever have before. We have our own content which has largely migrated over the past 20 years
Describe recent data communication development : Describe a recent data communication development you have read about in a newspaper or magazine and how it may affect businesses.
Which of the statements is correct for overhead : Which of the following statements is correct? Overhead consists of a variety of costs that may potentially have different cost drivers
How do compute the accounts receivable as of that date : How do Compute the accounts receivable as of that date. Assume that the company will need a budgeted balance sheet as of June 30.
Evaluate new project with the npv method : The interest expense will be $10,000 per year. Please evaluate this new project with the NPV method if the tax rate is 35% and the cost of capital is 15%.
Find amount of regular quarterly loan payments : If the interest rate is 13.5%p.a. compounded quarterly what is the amount of regular quarterly loan payments.
What is the variable overhead spending variance for march : What is the variable overhead spending variance for March? (Do not round intermediate calculations. Round the actual overhead rate to two decimal places)
Determine what will be the revised net operating income : Due to erratic sales of sole product-a high-capacity battery for laptop, If the sales manager is right, what will be the revised net operating income (loss)?
Identify a way that john can turn potential fixed cost : The company has 2,000 employees and manufactures and sells a variety. Identify a way that John can turn potential fixed costs into variable costs.

Reviews

Write a Review

Finance Basics Questions & Answers

  What is yield during ownership

Eight years later, you sell the bond for $987.50, immediately after you receive the semiannual interest check. What is your yield during ownership?

  Determine which company is more successful

Ziehart Pharmaceuticals reported net sales of $178,000 and cost of goods sold of $58,000. Candy Electronics Corp. reported net sales of $36,000 and cost of goods sold of $26,200. Calculate the gross profit percentage for both companies. From these ca..

  Process using both a financial calculator

What is the step by step process using both a financial calculator (inputting N, I/Y, PV, PMT, FV) and using a formula?

  Pandemic on financial markets and institutes

Explain the impact of "Covid -19" pandemic on Financial Markets and Institutes with global and local examples.

  What is the after-tax salvage value

A 5-year project requires the initial purchase of a $100,000 machine. This machine has an 8-year life and will be depreciated straight-line to zero. At the end of the project, the equipment can be sold for $20,000. The tax rate is 30 percent. What..

  Violet isaacsongave jeanne collection of coin

One month before she died on April 14, 2002, Violet Isaacson (Jeanne's mother) gave Jeanne collection of coin.

  Enumerate four of the international business methods and exp

Enumerate four of the International Business Methods and explain them.

  How successful has your entity been in terms of meeting

Prepare a 10- to 12-slide presentation using a modality of your choice. Your boss asks you to prepare a presentation for new donors.

  Calculate the npv of the project

Calculate the NPV of the project. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

  Weighted average cost of capital-lis company

What is the weighted average cost of capital [WACC] for LIS?

  What is the greatest risk associated with cash management

What is the greatest risk associated with cash management? Yields. Insolvency. Holding too much cash. Managing float.

  How savings institutions could use interest rate swaps

Will SIs that use swaps perform better or worse than those that were unhedged during a period of declining interest rates? Explain.

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