Increased net operating working capital

Assignment Help Financial Management

Reference no: EM132006858

The Ogren Corporation is considering purchasing a new spectrometer for the firm’s R&D department. The purchase price is $70,000 and it would cost another $15,000 to modify it for the special use for which it is intended. The spectrometer which falls into the MACRS 3- year property class (Year 1 - 33.33%, Year 2 - 44.44%, Year 3 - 14.82%, and Year4 - 7.41%) is projected to be sold after three years for $30,000. Use of this equipment would result in an increased net operating working capital of $4,000 over the life of the machine. The spectrometer is expected to produce EBIT of $35,000 per year. The firm’s tax rate is 40%, and the required rate of return on the project is 11%. What is the NPV?

Reference no: EM132006858

Questions Cloud

Discuss several disadvantages of linear programming : Describe the similarities and differences between TQM and Six Sigma quality-management technique.

What is the internal rate of return of the lease : The best estimate for the value of the computer after 4 years of wear and tear is $300,000. What is the internal rate of return (IRR) of the lease?

What is the yield to maturity at current market price : What is the yield to maturity at a current market price of (1) $800 and (2) $1,200?

Why did physician order urinalysis and a blood glucose test : Why did the physician order both a urinalysis and a blood glucose test? Why might Mr. Smith's vital signs show that his temperature is slightly elevated?

Increased net operating working capital : Use of this equipment would result in an increased net operating working capital of $4,000 over the life of the machine.

What is the time value of money : How are they different? What is the Time Value of Money and how does it relate to valuation of bonds?

Do we know what our future is : Health care organizations continually face challenges from various regulatory and government agencies and are also bound by Managed Care Organization (MCO).

Determine the product mix tat will maximize profits : Determine the product mix tat will maximize profits and calculate the value of contribution that would be earned if only 1248 labour hours are available

What is market price of stock if market rate of return : Arcs and Triangles paid an annual dividend of $1.47 a share yesterday. What is the market price of this stock if the market rate of return is 10 percent?

User Account

All Pages