Project will produce no cash flows for the first two years

Assignment Help Financial Management

Reference no: EM131027193

EEG, Inc. is considering a new project that will require an initial cash investment of $388,000. The project will produce no cash flows for the first two years. The projected cash flows for years 3 through 7 are $69,000, $88,000, $125,000, $140,000, and $160,000, respectively. How long will it take the firm to recover its initial investment in this project?

Reference no: EM131027193

Questions Cloud

Standard deviation of returns and expected rate of return : Stock A has an expected rate of return of 12% and a standard deviation of returns of 40%. Stock B has an expected rate of return of 18% and a standard deviation of returns of 60%. The correlation coefficient between the returns of Stock A and Stock B..

Medical insurance for your family : You have medical insurance for your family with a $250 deductible, 20% coinsurance, and $1,500 OOP maximum for each individual and $3,000 family OOP maximum. Calculate your OOP costs if you incur $6,000 in medical costs.

Describe the concept of incremental cash flows : Eureka Bottling Company was established in 1992 by Josie Smith. The company was extremely successful at the beginning of the 21st century, but sales have waned since then. In an attempt to rejuvinate EBC's sales, Ms. Calculate the weighted average co..

What is the percentage price change of these bonds : Bond J has a coupon rate of 5 percent and Bond K has a coupon rate of 11 percent. Both bonds have 18 years to maturity, make semiannual payments, and have a YTM of 8 percent. What if rates suddenly fall by 2 percent instead? If interest rates suddenl..

Project will produce no cash flows for the first two years : EEG, Inc. is considering a new project that will require an initial cash investment of $388,000. The project will produce no cash flows for the first two years. The projected cash flows for years 3 through 7 are $69,000, $88,000, $125,000, $140,000, ..

Cash budget to determine key methods : From the scenario, analyze TFC’s cash budget to determine key methods in which the budget may be optimized (e.g., by renegotiating terms and conditions on some of its payables, etc.). If you believe that there is room for improvement, recommend key s..

Using net present value analysis : Dixie Dynamite Company is evaluating two methods of blowing up old buildings for commercial purposes over the next five years. Method one (implosion) is relatively low in risk for this business and will carry a 11 percent discount rate. Method two (e..

Capital asset pricing model-dividend valuation model : Eaton Electronic Company’s treasurer uses both the capital asset pricing model and the dividend valuation model to compute the cost of common equity (also referred to as the required rate of return for common equity). Assume: Rf = 6 % Km = 9 % β = 1...

The fair present value of the treasury security : Explain what a STRIP is. The total sale proceeds from selling the stepped components of a Treasury security can sometimes be greater than the fair present value of the Treasury security. Why might this happen?

User Account

All Pages