Machine screws annually for automobile production

Assignment Help Financial Management
Reference no: EM131936621

Consider a project to supply Detroit with 20,000 tons of machine screws annually for automobile production. You will need an initial $3,200,000 investment in threading equipment to get the project started; the project will last for four years. The accounting department estimates that annual fixed costs will be $700,000 and that variable costs should be $200 per ton; accounting will depreciate the initial fixed asset investment straight-line to zero over the four-year project life. It also estimates a salvage value of $350,000 after dismantling costs. The marketing department estimates that the automakers will let the contract at a selling price of $310 per ton. The engineering department estimates you will need an initial net working capital investment of $320,000. You require a return of 13 percent and face a marginal tax rate of 38 percent on this project.

a-1. What is the estimated OCF for this project? (Do not round intermediate calculations. Enter your answer in whole dollars, not millions of dollars, e.g., 1,234,567.)

a-2. What is the estimated NPV for this project? (Enter your answer in dollars, not millions of dollars, e.g., 1,234,567. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

b. Suppose you believe that the accounting department’s initial cost and salvage value projections are accurate only to within ±15 percent; the marketing department’s price estimate is accurate only to within ±10 percent; and the engineering department’s net working capital estimate is accurate only to within ±5 percent. What is the worst-case NPV for this project? The best-case NPV? (A negative answer should be indicated by a minus sign. Enter your answer in dollars, not millions of dollars, e.g., 1,234,567. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Reference no: EM131936621

Questions Cloud

Calculate monthly payment amount of a car loan : Assume a car loan amount of $100,000, with annual interest rate 6% and 5 years term. Calculate monthly payment amount.
Compare with the cost of short-term bank loans : How does the cost of costly trade credit generally compare with the cost of short-term bank loans?
At what marginal tax rate would you be indifferent : Which one should you choose and why? At what marginal tax rate would you be indifferent to the choice between California and ExxonMobil bonds?
Calculate how much will you have in each in 19 years : If you invest $13,500 today, how much will you have in each of the following instances?
Machine screws annually for automobile production : Consider a project to supply Detroit with 20,000 tons of machine screws annually for automobile production.
Set up a network consisting of pcs routers and servers : You are required to set up a network consisting of PCs, routers and servers. You need to configure routing between routers (minimum two routers required).
What was the correct overall change in the net position : What was the correct change in the net position of the Enterprise Fund on the fund financial statements?
Satisfy required rate of return : How much will the stock price have to appreciate for you to satisfy your required rate of return of 16 ?percent?
What was the intrinsic value per share of the options : What was the intrinsic value per share of the options exercised in 2008? (Hint: Assume that Intel grants options at-the-money.)

Reviews

Write a Review

Financial Management Questions & Answers

  Foreign company acquisition

Acquisition by a foreign company and the effects of that decision and the results of foreign exchange in Euro and the exchange rate differences.

  Financial management for profit and non profit organizations

In this essay, we are going to discuss the issues of financial management in a non-profit organisation.

  Method for estimating a venture''s value

Evaluate venture's present value, cash and surplus cash and basic venture capital.

  Replacement analysis

This document show the Replacement Analysis of modling machine. Is replacement give profit to company or not?

  Business finance task - capital budgeting

Your company is considering using the payback period for capital-budgeting. Discuss the advantages and disadvantages of this technique.

  Analysis of the investment

In this project, you will focus on one of these: the additional cost resulting from the purchase of an apple press (a piece of equipment required to manufacture apple juice).

  Conduct a what-if analysis

Review the readings and media for this unit, including the Anthony's Orchard case study media. Familiarise yourself with the Anthony's Orchard company and its current situation.

  Determine operational expenditures

Organisations' behaviour is guided by financial data. In the short term, such data will help determine operational expenditures; in the long term, historical data may help generate forecasts aimed at determining strategic plans. In both instances.

  Personal financial management

How much will you have left over each half year if you adopt the latter course of action?

  Sources of finance for expansion into new foreign markets

A quoted company is considering several long-term sources of finance for expansion into new foreign markets.

  Long term financial planning

This assignment is designed for analyze Long term financial planning begins with the sales forecast and the key input in the long term fincial planning.

  Explain the role of fincial manager

This assignment explain the role of fincial manager, function of manger. And what are the motives of financial manager.

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