Manufacturing new elliptical trainers

Assignment Help Finance Basics
Reference no: EM13679107

A company is considering manufacturing new elliptical trainers. This company did a marketing research 2 years ago, paying $750,000 consulting fees and found that the market is ripe for such a new product. The company feels that they can sell 5,000 of these per year for 5 years (after which time this project is expected to shut down). The elliptical trainers would sell for $ 2,000 each and have a variable cost of $500 each. The annual fixed costs associated with production would be $1,000,000. In addition, there would be a $5,000,000 initial expenditure associated with the purchase of new production equipment. It is assumed that this initial expenditure will be depreciated using the straight- line method down to zero over 5 years. This project will also require a one- time initial investment of $1,000,000 in working capital associated with inventory. The introduction of this new elliptical trainer will reduce the sales of an existing training machine that the company currently sells. The company estimates that $250,000 per year before tax basis will be lost on this existing training machine if the new elliptical trainer is introduced. At the end of the 5th year, the company estimates selling the production equipment for $150,000. Finally, assume that the firm's marginal tax rate is 34 percent.
What is CF0?
What is CF1?
What is CF5?

Reference no: EM13679107

Questions Cloud

Why is the future value interest factor : Why is the future value interest factor of this annuity equal to 1.00
A trailer truck is completely filled with crude oil : A trailer truck is completely filled with crude oil
Does product mix impact decisions to accept new business : Does product mix impact decisions to accept new business?
Would affect the stock-holder equity account : Would affect the stock-holder equity account
Manufacturing new elliptical trainers : A company is considering manufacturing new elliptical trainers.
Is required to increase its fixed assets : Last year, Moo Goo Inc. had $350 million in sales, and it had $270 million of fixed assets that were used at 65% of capacity. In millions, by how much could Moo Goo's sales increase before it is required to increase its fixed assets?
Calculate the current price of the common stock : Using the Constant Dividend Growth Model calculate the current price of the Common Stock.
How does the concept of risk differ for an insurance company : How does the concept of risk differ for an insurance company as compared to another type of corporation or individual? make sure to include the impact of the law of large numbers.
Explain what is the vapor pressure of bromine : Equilibrium is established between Br-Br (l) and Br-Br (g) at 25 C. A 250.0mL sample of the vapor weighs 0.486g. Explain what is the vapor pressure of bromine 15 25.0 C, in mmHg.

Reviews

Write a Review

Finance Basics Questions & Answers

  Preferred stock financing

ABC Company plans to control the cost of its capital and decides that the weighted average cost of capital, WACC, should be around 12 percent. ABC also has a target capital structure of 50% common stock.

  What are the weights for investing in the risk-free asset

suppose that a fund that tracks the sampp has mean erm 16 and standard deviation m 10 and suppose that the t-bill

  Machine a will save 5000 per year for 6 years machine b

machine a will save 5000 per year for 6 years machine b will save 6000 per year for 5 years. if the interest rate is

  Find change in break-even point

Jay Linoleum Corporation has fixed costs of $70,000. Its product currently sells for $4 per unit and has variable costs per unit of $2.60. Mr. Thomas, the head of manufacturing,

  Collaborates with a finance company

T he benefits of collaboration between the large retailer and the finance company.

  Compute the length of firmcash conversion cycleif zoccos

the zocco corporation has an inventory conversion period of 60daysan average collection period of 38 days and a

  What is the net present value of a project

What is the net present value of a project with the following cash flows if the discount rate is 15 percent? Year 0 cash flow -$59,200. Year 1 cash flow $21,600. Year 2 cash flow $28,300. Year 3 cash flow $14,400. Year 4 cash flow $7,200.

  Explain why investors may be attracted to high-risk

explain why investors may be attracted to high-risk investments such as exchange-traded derivatives global funds and

  Which project will the stockholders prefer

Which project will the stockholders prefer and which project maximizes the value of the firm? Why are these answers different?

  Generally accepted accounting principles are a set of

generally accepted accounting principles area a set of standards and rules that are recognized as a general guide for

  Offer value per share and offer premium

Garth's Micro Brewery, whose shares are currently trading at $40 per share, is considering acquiring Wayne's Beer Bottling Co. What is the offer value per share and offer premium?

  Sll for 210 in one years time immediately after it pays a

jumbuck exploration has a current stock price of 2.00 and is expected to sell for 2.10 in one years time immediately

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