Profitable operations-calculate the npv of the project

Assignment Help Financial Management
Reference no: EM131952861

Mustaine Enterprises, Inc., has been considering the purchase of a new manufacturing facility for $285,000. The facility is to be fully depreciated on a straight-line basis over seven years. It is expected to have no resale value after the seven years. Operating revenues from the facility are expected to be $120,000, in nominal terms, at the end of the first year. The revenues are expected to increase at the inflation rate of 4 percent. Production costs at the end of the first year will be $45,000, in nominal terms, and they are expected to increase at 5 percent per year. The real discount rate is 7 percent. The corporate tax rate is 34 percent. The company has other ongoing profitable operations. Calculate the NPV of the project. (Do not round intermediate calculations and round your final answer to 2 decimal places (e.g., 32.16).)

Reference no: EM131952861

Questions Cloud

What is the value of the investment opportunity today : A new start-up company promises to pay an investor each quarter for the next two years. what is the value of the investment opportunity today?
The current spot rate : How much will you pay in USD to purchase MXN500,000 at the current spot rate?
Required to compute the taxable benefit where necessary : Advise both Charlie and Shine Homes about their fringe benefit consequences of these events. You are required to compute the taxable benefit where necessary.
What is the maximum percentage decline in stock : What is the maximum percentage decline in the stock before you will receive a margin call if the maintenance margin is 28 percent?
Profitable operations-calculate the npv of the project : The corporate tax rate is 34 percent. The company has other ongoing profitable operations. Calculate the NPV of the project.
What is your annualized percentage return on investment : You also received a dividend of $0.19 per share. What is your annualized percentage return on this investment?
Discount cash flow calculation to determine the NPV : If the required rate of return is 0.2, conduct a discount cash flow calculation to determine the NPV.
What is effective percentage annual rate of return : The company paid a dividend of $0.25 per share the day before you sold your stock. What is your effective percentage annual rate of return?
Basket of goods and services : Suppose that a basket of goods and services in the United States costs $110 and in China the same basket costs ¥700.

Reviews

Write a Review

Financial Management Questions & Answers

  Corporation to exist is to maximize shareholder value

"The number one reason for a corporation to exist is to maximize shareholder value"

  Debt management ratios

Trina's Trikes, Inc. reported a debt-to-equity ratio of 1.93 times at the end of 2008. If firm's total debt at year-end was $10.70 million,

  Positive return-when the overall stock market declined

A stock had a positive return last year, a year when the overall stock market declined.

  Excess profits and resulting cash inflows

If the subsidiary proves to be very successful, what will you do with its "excess profits" and resulting cash inflows?

  What was your total return for the past year

You purchased a zero-coupon bond one year ago for $283.33. The market interest rate is now 9 percent. Assume semiannual coumpounding periods. If the bond had 15 years to maturity when you originally purchased it, what was your total return for the pa..

  Present value of this investment pays

An investment pays you $20,000 at the end of this year, and $10,000 at the end of each of the four following years. What is the present value (PV) of this investment, given that the interest rate is 4% per year?

  Resource consumption and global environmental impact

Humans are constantly innovating ways to produce and consume material resources. What effect does population have on resource consumption and global environmental impact? In what ways has technology contributed to consumption overpopulation? Can you ..

  What is the value of the current assets

Mellott Corp. has an equity value of $13,705. Long-term debt is $9,200. Net working capital, other than cash, is $3,740. Fixed assets are $18,380 and current liabilities are $2,030. How much cash does the company have? Cash $ What is the value of the..

  Calculating future values

Calculating Future Values. You have just made your first $5,000 contribution to your individual retirement account. Assuming you earn a 10.1 percent rate of return and make no additional contributions, what will your account be worth when you retire ..

  What is becker operating cycle to the nearest day

What is Becker's operating cycle to the nearest day?

  Account with an effective interest rate

Rhonda deposits $A in an account with an effective interest rate of 7.8%. she also deposits $B into another account with an effective interest rate of 8.8%.

  Weighting in determining your credit score

Which of the following credit score factors has the greatest % weighting in determining your credit score?

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