Reference no: EM131100987
How do you set up the NPV/Cashflows for this assignment
MacDonald Publishing is considering entering a new line of business. In analyzing the potential business, their financial staff has accumulated the following information:
The new business will require a capital expenditure of $5 million at t = 0. This expenditure will be used to purchase new equipment.
This equipment will be depreciated according to the following depreciation schedule:
MACRS
Depreciation
Year Rates
1 0.33
2 0.45
3 0.15
4 0.07
The equipment will have no salvage value after four years.
If MacDonald goes ahead with the new business, inventories will rise by $500,000 at t = 0, and its accounts payable will rise by $200,000 at t = 0. This increase in net operating working capital will be recovered at t = 4.
The new business is expected to have an economic life of four years. The business is expected to generate sales of $3 million at t = 1, $4 million at t = 2, $5 million at t = 3, and $2 million at t = 4. Each year, operating costs excluding depreciation are expected to be 75% of sales.
The company's tax rate is 40%.
The company's weighted average cost of capital is 10%.
The company is very profitable, so any accounting losses on this project can be used to reduce the company's overall tax burden.
What is the expected net present value (NPV) of the new business?
|
A rate described by the exponential density
: Suppose you are watching a radioactive source that emits particles at a rate described by the exponential density f (t) = ?e-?t , where ? = 1, so that the probability P (0, T ) that a particle will appear in the next T seconds is P ([0, T ]) = { T ?e..
|
|
How is preferred stock similar to bonds
: How is preferred stock similar to bonds? Dividend payments to preferred shareholders (much like bond interest payments to bondholders) are tax deductible. Investors can sue the firm if preferred dividend payments are not paid (much like bondholder..
|
|
Cryptons cost of capital
: Dividends have grown at the rate of 5.1% per year and are expected to continue to do so for the foreseeable future. What is Crypton's cost of capital where the firm's rate is 30%?
|
|
Scientific definition of the word: catastrophism
: Based upon the characteristics of science you learned about in Module 1, explain why any of the following would be considered to be a theory in the scientific definition of the word: Catastrophism, Uniformitarianism, and Larmarkian/transformationa..
|
|
Npv-cashflows for assignment
: MacDonald Publishing is considering entering a new line of business. In analyzing the potential business, their financial staff has accumulated the following information:
|
|
What is the value of the property
: A lender offers an eight percent, 20-year, fully amortizing mortgage loan (requiring monthly payments; annual constant of .1003728) in an amount that will result in a debt coverage ratio of 1.3 and a loan-to-value ratio of 70 percent. What is the ..
|
|
Craft a five pages paper on artificial intelligence
: craft a 4-5 page paper on Artificial Intelligence with 4 or more new references (that you find). Choose a particular style for your references.
|
|
Advantages to the company and the executive
: Why would a company decide to pay executives in options as opposed to salary? Please explain fully the advantages to the company and the executive of such a practice.
|
|
Compute the required gain of the op amp
: We wish to design the differentiator of Fig. 8.52 for a pole frequency of 100 MHz. If the values of R1 and C1 cannot be lower than 1 k Ω and 1 nF, respectively, compute the required gain of the op amp.
|