Performance below what level of expected sales

Assignment Help Financial Management
Reference no: EM131511660

We are examining a new project. We expect to sell 6, 300 units per year at $57 net cash flow apiece for the next 10 years. in other words, the annual operating cash flow is projected to be $57 times 6.300 = $359, 100. The relevant discount rate is 12 percent and the initial investment required is $1, 740,000.

1. What is the base case NPV? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) NPV $

2. After the first year the project can be dismantled and sold for $1, 610,00. If expected sales are revised based on the first years performance below what level of expected sales would it make seem to abandon the project? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) The level of expected sales units.

Reference no: EM131511660

Questions Cloud

What is your company weighted average flotation cost : What is your company's weighted average flotation cost, assuming all equity is raised externally?
What is the company debt-equity ratio : What is the company debt-equity ratio?
Miller manufacturing lies a target debt-equity ratio : Miller Manufacturing lies a target debt-equity ratio of 55 Its cost of equity is 14 percent,
What is the value of the option to wait : What is the value of the option to wait?
Performance below what level of expected sales : If expected sales are revised based on the first years performance below what level of expected sales would it make seem to abandon the project?
What is value in year three : What is the value in year 3 of a $800 cash flow made in year 6 if interest rates are 9 percent?
What is the financial break-even point for the project : What is the financial break-even point for the project?
Calculate the best case and worst-case NPV figures : Calculate the best case and worst-case NPV figures.
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?

Reviews

Write a Review

Financial Management Questions & Answers

  Evaluating two different silicon wafer milling machines

You are evaluating two different silicon wafer milling machines. The Techron I costs $261,000, has a three-year life, and has pretax operating costs of $70,000 per year. The Techron II costs $455,000, has a five-year life, and has pretax operating co..

  What interest rate must you earn to achieve your goal

You have $1,003 today, and want to double your money in 6 years. What interest rate must you earn to achieve your goal? The house you want to buy costs $277 thousand. You plan to make a cash down payment of 10 percent, and borrow the rest in a 30 yea..

  Semi annual compounding period-what is the price of the bond

You find a zero coupon bond with a par value of $10,000 and 19 years to maturity. The yield to maturity on this bond is 4.1 percent. Assume semi annual compounding periods. What is the price of the bond?

  Cost of common equity with and without flotation

The Evanec Company's next expected dividend, D1, is $3.15; its growth rate is 4%; and its common stock now sells for $30. New stock (external equity) can be sold to net $28.50 per share. What is Evanec's cost of retained earnings, rs?

  What is the price of the strips and what is the quoted price

A Treasury STRIPS matures in 7 years and has a yield to maturity of 9.4 percent. Assume the par value is $100,000. What is the price of the STRIPS?  What is the quoted price?

  Pro-forma incremental earnings and pro-forma free cash flow

Can you describe a situation when we use pro-forma incremental earnings and pro-forma free cash flow? I still can’t understand how they work in a real world.

  The government passes a usury law that prohibits lending

If you decide to sell she must buy. In return you give her $80,000 in cash and the right to buy the store from you for $X at the end of five years. How can this contract provide you with a 20% annual rate of return on the $80,000?

  Postal service-bid price

Consider a project to supply 117 million postage stamps per year to the U.S. Postal Service for the next five years. You have an idle parcel of land available that cost $2,070,000 five years ago; if the land were sold today, it would net you $2,270,0..

  Explain to him the significant tax and nontax issues

One of your best individual clients is thinking about starting up a new business, and he is seeking your advice on which business form he should select. In particular, he's trying to decide whether to operate the business as a partnership or a C corp..

  What is the firms current receivables balance

Fargo Memorial Hospital has annual net patient service revenues of $14,400,000. It has two major third-party payers, plus some of its patient is self-payers. The hospitals patient accounts manager estimates that 10% of the hospitals paying patients (..

  Expected rate of return from this investment opportunity

James Fromholtz is considering whether to invest in a newly formed investment fund. Based on these potential outcomes, what is your estimate of the expected rate of return from this investment opportunity? I know this is 22.5%. Calculate the standard..

  What is company cost of equity capital

David Ortiz Motors has a target capital structure of 30% debt and 70% equity. What is the company's cost of equity capital?

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