Explain a discounted cash-flow analysis

Assignment Help Financial Management

Reference no: EM13215594

A firm considers building a new and improved production facility for one of its existing products. It would be built on a piece of vacant land that the firm owns. This land was acquired four years ago at a cost of $200,000; it has a current market value of $1,000,000. The building can be erected for $350,000. Machinery worth $150,000 needs to be bought. Capital cost allowances on a declining balance will be taken on all depreciable assets at a rate of 20 percent. Operating savings from the new production facility are expected to be $300,000 per year for the next 10 years. The salvage value at the end of the 10 years is expected to be $1,500,000, which is solely the value of the land. The firm's tax rate is 40 percent, and the firm's discount rate is 15 percent.

Based on a discounted cash-flow analysis, should the investment to be undertaken?

Reference no: EM13215594

Questions Cloud

Minimize the total cost of shipping : The costs of flying a bicycle are shown in the table below. WACO wants to minimize the total cost of shipping the required bicycles to its customers.

Where does the unknown metal fit into your activity series : Then if you inserted the unknown piece of the metal into the solution of iron (III) chloride a deposit formed on the bottom of the well in the well plate. Where does the unknown metal fit into your activity series?

Calculate the increase in sales over the current volume : Product X is a consumer product with a retail price of $9.95. Retailer's margins on the product are 40% (based on the selling price to consumers) and wholesaler's margins are 8% (based on the selling price to retailers). The size of the market is ..

Calculate the molarity of sodium thiosulfate secondary : I did three trials and my volumes for the sodium thiosulfate were 12.5 ml, 11.1 ml, and 10.2 ml. I am not sure how to get the molarity of the sodium thiosulfate secondary solution for each trial from this information.

Explain a discounted cash-flow analysis : The salvage value at the end of the 10 years is expected to be $1,500,000, which is solely the value of the land. The firm's tax rate is 40 percent, and the firm's discount rate is 15 percent. Based on a discounted cash-flow analysis, should the in..

Draw a five-force diagram for the child furniture : Draw a five-force diagram for the child furniture manufacturing, and briefly discuss the nature and strength of each of the five competitive forces in child furniture.

Rank the following in order of decreasing number of atoms : Rank the following in order of decreasing number of atoms

Small manufacture of electronic research equipment : Howard Electronics, a small manufacture of electronic research equipment, has approximately 6,600 items in its inventory and has hired Joan Blasco-Paul to managed inventory.

Which of the following compounds are insoluble in water : Which of the following compounds are insoluble in water?

User Account

All Pages