Looking at new sausage system with installed cost

Assignment Help Financial Management

Reference no: EM13937157

Kolby’s Korndogs is looking at a new sausage system with an installed cost of $645,000. This cost will be depreciated straight-line to zero over the project’s five-year life, at the end of which the sausage system can be scrapped for $103,000. The sausage system will save the firm $191,000 per year in pretax operating costs, and the system requires an initial investment in net working capital of $49,000. Required: If the tax rate is 34 percent and the discount rate is 8 percent, what is the NPV of this project?

Reference no: EM13937157

Questions Cloud

Expansion project-requires initial fixed asset investment : Cochrane, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment of $2,430,000. The fixed asset will be depreciated straight-line to zero over its three-year tax life, after which time it will be worth..

The process of evaluating firms operations : The process of evaluating a firm's operations to determine the minimum volume it must sell to avoid losing money is referred to as: The degree of financial leverage is measured by relating the percentage change in earnings per share to the percentage..

What is cash flow to stockholders and operating cash flow : Volbeat Corp. shows the following information on its 2015 income statement: sales = $403,000; costs = $305,000; other expenses = $7,900; depreciation expense = $18,200; What is the 2015 operating cash flow? What is the 2015 cash flow to stockholder..

Liquidation sale : Mathias has been the sole proprietor of a clothing store for many years. He intends to retire after holding a "liquidation sale". He wants to avoid ordinary income from the sale of the business inventory, so he shuts down the store for one month and ..

Looking at new sausage system with installed cost : Kolby’s Korndogs is looking at a new sausage system with an installed cost of $645,000. This cost will be depreciated straight-line to zero over the project’s five-year life, at the end of which the sausage system can be scrapped for $103,000. If the..

What is the value of the firm : Cool Manufacturing has an expected EBIT of $89,000 in perpetuity and a tax rate of 35 percent. The firm has $210,000 in outstanding debt at an interest rate of 8.80 percent, and its unlevered cost of capital is 11 percent. What is the value of the fi..

What is the target variable cost per mouse : A company believes it can sell 5,500,000 of its proposed new optical mouse at a price of $10.50 each. There will be $8,000,000 in fixed costs associated with the mouse. If the company desires to make a profit $2,000,000 on the mouse, what is the targ..

Expected return on the portfolio : You own a portfolio that has $2,150 invested in Stock A and $3,200 invested in Stock B. If the expected returns on these stocks are 10 percent and 17 percent, respectively, what is the expected return on the portfolio?

Considering production of a lighted world globe : The Falling Snow Company is considering production of a lighted world globe that the company would price at a markup of 0.30 above full cost. Management estimates that the variable cost of the globe will be $70 per unit and fixed costs per year will ..

User Account

All Pages