Net present value of the new purification system project

Assignment Help Financial Management
Reference no: EM131891599

1. Litchfield Design is evaluating a 3-year project that would involve buying a new piece of equipment for 170,000 dollars today. The equipment would be depreciated straight-line to 10,000 dollars over 2 years. In 3 years, the equipment would be sold for an after-tax cash flow of 20,000 dollars. In each of the 3 years of the project, relevant revenues are expected to be 125,000 dollars and relevant costs are expected to be 55,000 dollars. The tax rate is 50 percent and the cost of capital for the project is 7.57 percent. What is the NPV of the project?

2. Oxygen Optimization is considering buying a new, high efficiency purification system. The new system would be purchased today for 16,600 dollars. It would be depreciated straight-line to 1,600 dollars over 2 years. In 2 years, the system would be sold and the after-tax cash flow from capital spending in year 2 would be 2,500 dollars. The system is expected to reduce costs by 5,700 dollars in year 1 and by 13,800 dollars in year 2. If the tax rate is 50 percent and the cost of capital is 10.3 percent, what is the net present value of the new purification system project?

Reference no: EM131891599

Questions Cloud

House for the full term and ignore taxes in your analysis : Assume the homeowner will remain in the house for the full term and ignore taxes in your analysis.
Charles probate estate related to revocable living trust : How much is included in Charles’ probate estate related to the revocable living trust? Why?
Compute the efficiency and percent idle time for the system : Use a takt time of 120 seconds and follow the "most following tasks" heuristic rule to assign these tasks to the work stations.
The yield to maturity on comparable-risk bond : Determine the yield to maturity. What is the value of the bonds to you given the yield to maturity on a? comparable-risk bond?
Net present value of the new purification system project : If the tax rate is 50 percent and the cost of capital is 10.3 percent, what is the net present value of the new purification system project?
Explain the independent components of innovation : Take a holistic view of an organization's innovation capability, paying attention to the four independent components of innovation: leadership and organization.
Market required yield to maturity : If the? market's required yield to maturity had fallen to 5 ?percent, what would they have been selling? for?
Discuss the guidance on purpose of the SOW : Briefly discuss the guidance on purpose and content of the SOW, WBS, and Schedule that you will give to this person to assure a "job well done".
Discuss about the self-discipline to eat right : It takes a lot of self-discipline to eat right and to exercise, especially for children. They do not understand why they have to change the way they eat.

Reviews

Write a Review

Financial Management Questions & Answers

  What is growth company cost of preferred stock

Growth? Company's current share price is $19.85 and it is expected to pay a $1.20 dividend per share next year. After that, the firm's dividends are expected to grow at a rate of 4.5% per year. What is an estimate of Growth Company's cost of equity? ..

  What is the cash flow from disposal

Reversing Rapid Co. Purchases an asset for $183552. This asset qualifies as a five-year recovery asset under MACRS. The five-year expense percentages for years 1, 2, 3, and 4 are 20.00%, 32.00%, 19.20%, and 11.52% respectively. Reversing Rapids has a..

  Which is more relevant-pretax or the after-tax cost of debt

What is the pretax cost of debt? Which is more relevant, the pretax or the after-tax cost of debt?

  Arithmetic and geometric returns for stock

A stock has had returns of 9 percent, 27 percent, 15 percent, −15 percent, 27 percent, and −6 percent over the last six years. What are the arithmetic and geometric returns for the stock?

  Determine which stock has higher risk adjusted returns

Determine which stock has higher risk-adjusted returns according to the Sharpe index. Which stock has higher risk-adjusted returns according to the Treynor index? Show your work.

  Compute expected return given these three economic states

Compute the expected return given these three economic states, their likelihoods, and the potential returns:

  Expected incremental cash flow related to working capital

Six Twelve, Inc., is considering opening up a new convenience store in downtown New York City. The expected annual revenue at the new store is $660,000. What is the expected incremental cash flow related to working capital when the store is opened?

  Automobile replacement analysis

You are considering the purchase of a new car. You presently own a red 2013 Chevrolet Camaro 2door LS Coupe with 60,000miles. It has 3.6 liter V6 engine with manual 6 speed transmission. Based on the replacement value analysis, what is the trade-in v..

  What is the project average accounting return

You’re trying to determine whether or not to expand your business by building a new manufacturing plant. what is the project’s average accounting return (AAR)?

  What is the total return on the stock during the past year

What is the total return on the stock during the past year in terms of Yen? In terms of dollar?

  Net incremental cash flows for capital budgeting project

Which of the following is not an adjustment made to NOPAT on the way to obtaining net incremental cash flows for a capital budgeting project?

  Two different investments

You’re trying to choose between two different investments, both of which have up-front costs of $100,000. Investment G returns $165,000 in 9 years. Investment H returns $285,000 in 16 years.

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