Find the value of the project in given situations

Assignment Help Finance Basics

Reference no: EM131975180

Question: Your firm is contemplating the purchase of a new $787,500 computer-based order entry system. The system will be depreciated straight-line to zero over its seven-year life. It will be worth $57,000 at the end of that time. You will be able to reduce working capital by $52,000 at the beginning of the project. Working capital will revert back to normal at the end of the project. Assume the tax rate is 40 percent.

Requirement 1: Suppose your required return on the project is 7 percent and your pretax cost savings are $207,000 per year. What is the NPV of the project? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

NPV $

Requirement 2: Suppose your required return on the project is 7 percent and your pretax cost savings are $147,000 per year. What is the NPV of the project? (Do not round intermediate calculations. Negative amount should be indicated by a minus sign. Round your answer to 2 decimal places (e.g., 32.16).)

NPV $

Reference no: EM131975180

Questions Cloud

What is the book tax difference for goodwill : During 2018, Tommy Corp determined that the carrying value of the goodwill should be reduced to $150,000. What is the book tax difference for goodwill in 2018

Find the payback period for the project : Find the payback period for the following project: the discount rate 7% Project X Initial Outlay $16,900

What is value of investment at the current interest rate : What is the value of the investment at the current interest rate of 13 percent?

Why was your chosen financial event newsworthy : Why was your chosen financial event newsworthy? Why do you believe this news was important? Why did this particular article catch your attention?

Find the value of the project in given situations : Your firm is contemplating the purchase of a new $787,500 computer-based order entry system. The system will be depreciated straight-line to zero over.

What is the variance of the payo of the game : What is your expected payo of the game? What is the variance of the pay of the game?

Calculate the amount of cash received from customers : Smith & Sons is converting its sales revenues to corresponding cash amounts using the direct method. Calculate the amount of cash received from customers

What is the dividend per share the firm should pay : Assume that a firm is using the residual dividend policy. what is the dividend per share the firm should pay?

What is the amount of gain which sean recognizes on exchange : Sean exchanges business equipment with a $220,000 adjusted basis for $20,000 cash. What is the amount of gain which Sean recognizes on the exchange?

User Account

All Pages