Four-year project to improve its production efficiency

Assignment Help Financial Management
Reference no: EM132028982

Purple Haze Machine Shop is considering a four-year project to improve its production efficiency. Buying a new machine press for $521645 is estimated to result in some amount of annual pretax cost savings. The press will have an aftertax salvage value at the end of the project of $86171. The OCFs of the project during the 4 years are $172648, $191855, $171074 and $168674, respectively. The press also requires an initial investment in spare parts inventory of $25569, along with an additional $2370 in inventory for each succeeding year of the project. The shop's discount rate is 7 percent. What is the NPV for this project?

Reference no: EM132028982

Questions Cloud

What will be required return on your portfolio : If you invest the money in a stock with a beta of 1.60, what will be the required return on your $5.5 million portfolio?
With the growth rate falling off to constant : Dividends are expected to grow at a 21 percent rate for the next 3 years, with the growth rate falling off to a constant 4 percent thereafter.
Expected dividend per share for each of the next five years : What is the expected dividend per share for each of the next 5 years? Show all work.
How many interest payments are left for bond of easy corp : What is the cost of debt for Easy Corp.? How many interest payments are left for the bond of Easy Corp.?
Four-year project to improve its production efficiency : Purple Haze Machine Shop is considering a four-year project to improve its production efficiency.
New assembly line after taking flotation costs into account : What is the true cost of building the new assembly line after taking flotation costs into account?
What is required return for the overall stock market : What is the required return for the overall stock market? What is the required rate of return on a stock with a beta of 0.9?
What is project whiskey discounted payback period : What is Project Whiskey’s discounted payback period if our WACC is 8%?
Foreign exchange risk and capital budgeting : How is foreign exchange risk sensitivity factored into the capital budgeting analysis of a foreign project?

Reviews

Write a Review

Financial Management Questions & Answers

  Degree of operating leverage at given level of output

Consider a four-year project with the following information: initial fixed asset investment = $410,000; straight-line depreciation to zero over the four-year life; zero salvage value; price = $22; variable costs = $14; fixed costs = $110,000; quantit..

  Expected net present value and standard deviation

Grow Corp is a medium sized commodity producer. It is already involved with industries such as oil and gas, forest products and gold exploration. Grow Corp operates in Australasia as well as in North America and the company exports everywhere in the ..

  Value of the shareholders equity account for this firm

What is the value of the shareholders’ equity account for this firm?

  What is the pre-tax cost of debt for the newly-issued bonds

The marginal tax rate is 35%. What is the pre-tax cost of debt for the newly-issued bonds?

  Smallest expected loss

Your portfolio allocates equal funds to the DW Co. and Woodpecker, Inc. DW Co. stock has an annual return mean and standard deviation of 13 percent and 42 percent, respectively. Woodpecker, Inc., stock has an annual return mean and standard deviation..

  How can investors hold a portfolio with a weight

Which type of company do you think will have a higher beta: fast-food chain or a cruise-ship firm? Why.- How can investors hold a portfolio with a weight of more than 100 percent in a particular asset.

  How much must you accumulate by the time you reach age 45

If you expect your investments to earn 12 percent per year over the next 15 years and 10 percent per year thereafter, how much must you accumulate by the time you reach age 45?

  Calculate the return on assets for the year

Calculate the return on assets for the year, presenting your answer in percentage terms, rounded to two decimal places. e.g. 20.00%.

  Identical to GAAP retained earnings

Will Corporation has two over’s, Gus and Jack who are father and son. Gus owns 100 shares which he acquired in 2005 for 15,000. Jack owns 100 shares which he acquired in 2007 for 21,000. Will Corp. accumulated E and P is identical to GAAP retained ea..

  The interest rate risk associated with using?short-term debt

Nevertheless, the managers are not comfortable with the interest rate risk associated with using?short-term debt.

  What is the value of the stock

A firm just paid a dividend of $3.00 and the dividend will grow at a constant rate of 10% forever and the required rate of return is 16%. What is the value of the stock?

  Risky asset depends on three components

According to CAPM, the expected return on a risky asset depends on three components. Name and describe each component explaining its role in determining expected return.

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