Litchfield design is evaluating three-year project

Assignment Help Financial Management

Reference no: EM132032593

Litchfield Design is evaluating a 3-year project that would involve buying a new piece of equipment for 190,000 dollars today. The equipment would be depreciated straight-line to 30,000 dollars over 2 years. In 3 years, the equipment would be sold for an after-tax cash flow of 42,000 dollars. In each of the 3 years of the project, relevant revenues are expected to be 160,000 dollars and relevant costs are expected to be 43,000 dollars. The tax rate is 50 percent and the cost of capital for the project is 10.55 percent. What is the NPV of the project?

Reference no: EM132032593

Questions Cloud

The interest rate cap based on the forecast of libor assumed : The seller of the interest rate cap based on the forecast of LIBOR assumed above over the three-year period is.

Economic explanations of profitable investment strategy : Is it important to know the economic explanations of a profitable investment strategy?

Considering buying purification system : Oxygen Optimization is considering buying a new purification system. what is the net present value of the new purification system project?

Project would require initial investment in equipment : What is the NPV of project A. The project would require an initial investment in equipment of 34,000 dollars and would last for either 3 years or 4 years

Litchfield design is evaluating three-year project : Litchfield Design is evaluating a 3-year project that would involve buying a new piece of equipment for 190,000 dollars today.

The momentum effect is against market efficiency : Which model would suggest the momentum effect is against market efficiency?

Fairfax paint is evaluating two-year project : Fairfax Paint is evaluating a 2-year project that would involve buying equipment for 420,000 dollars that would be depreciated to 20,000 dollars over 2 years

Noticed significant decrease in the profitability : EnterTech has noticed a significant decrease in the profitability of its line of portable CD players.

What is your new semiannual interest payment : What is your new semiannual interest payment? What would the par value be at maturity, assuming 2.50 percent annual inflation rate and ten-year maturity period?

User Account

All Pages