Solution-Incorporating the effect of the opportunity cost

Incorporating the effect of the opportunity cost

Assignment Help Finance Basics

Reference no: EM132049215

Assume you have completed a capital budgeting analysis of building a new plant on land you own, and the project's NPV is $100 million. You now realize that instead of building the plant, you could build a parking garage, and would generate a pre tax revenue of $22 million. The project would last 3 years, the corporate tax rate is 40%, and the WACC is 5%. What is the new NPV of the project, after incorporating the effect of the opportunity cost?

Reference no: EM132049215

Questions Cloud

Expected sales to forecast the monthly cash collections : Expected sales to forecast the monthly cash collections, accounts receivable balance, monthly cash disbursements,

Same exercise price and expiration date : What is the value of a call option written on the stock with the same exercise price and expiration date as the put option?

Describes the ground rules applied in an effective team : Describes the ground rules applied in an effective team and describes the consequences of not utilizing ground rules for team effectiveness

Mountain company beta estimated : Treasury bills currently pay a return of 3%; the stock market return over the same period averaged 11%, and Mountain company's beta is estimated

Incorporating the effect of the opportunity cost : What is the new NPV of the project, after incorporating the effect of the opportunity cost?

No change to it throughout the project life : If net working capital is a cash outflow in period zero, and there is no change to it throughout the project life. How should we treat it in the terminal year?

Estimate how many deaths there are annually from tornado : Estimate how many deaths there are annually from tornado and drowning in the United States. Provide an actual number in your answer and explain how you came

Principle of corporate finance : If an investor's simple annual required rate of return is 12 percent with quarterly compounding, how much should the investor be willing to pay for this bond?

What is the equivalent annual cost of the tool : If the discount rate is 10% and the lathe will last for 5 years, what is the equivalent annual cost of the tool?

User Account

All Pages

Incorporating the effect of the opportunity cost

Reference no: EM132049215

Reference no: EM132049215

Questions Cloud

Reviews

Write a Review

Finance Basics Questions & Answers

Financial reporting and analysis

A report on financial accounting

Describe the types of financial ratios

Differences between sole proprietorship and corporation

Prepare a cash budget statement

What are the implied interest rates

State pricing theory and no-arbitrage pricing theory

Small business administration

Effect of financial leverage

Evaluate the basis for the payment to the lender

Importance of opps, ipps, mpfs and dmepos

Time value of money

Assured A++ Grade

Academics

Major Subjects

Majors

Get In Touch

TERMS & POLICIES

HELP & SUPPORT