Projections given for price-quantity and variable costs

Assignment Help Financial Management

Reference no: EM131075742

We are evaluating a project that costs $1035725, has a seven-year life, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 41186 units per year. Price per unit is $53, variable cost per unit is $22, and fixed costs are $804779 per year. The tax rate is 37 percent, and we require a 11 percent return on this project. Suppose the projections given for price, quantity, variable costs, and fixed costs are all accurate to within +/-12 percent. What is the NPV of the project in best-case scenario?

Reference no: EM131075742

Questions Cloud

Construct arbitrage strategy to exploit mispriced forward : Stock XYZ pays dividends of $2 every three months, namely at T1 = 2/12; T2 = 5/12; T3 = 8/12; : : :. Consider a forward contract on XYZ with maturity T = 9/12, i.e 9 months. If S0 = 200, F = 200 and r = 0.04, construct an arbitrage strategy to exploi..

The after-tax salvage and the return of working capital : The Campbell Company is considering adding a robotic paint sprayer to its production line. The sprayer's base price is $1,080,000, and it would cost another $23,000 to install it. If the project's cost of capital is 14 %, what is the NPV of the proje..

Mutual fund earn to exceed investment in money market fund : You are going to invest in a stock mutual fund with a 7 percent front-end load and a 1.35 percent expense ratio. You also can invest in a money market mutual fund with a 2.8 percent return and an expense ratio of .30 percent. If you plan to keep your..

The security pays interest compounded annually : If Steve invests $5,000 in an interest bearing security paying 10% per year for 5 years, what will his investment be worth at the end of 5 years: a. if the security pays simple interest? b. if the security pays interest compounded annually? c. How mu..

Projections given for price-quantity and variable costs : We are evaluating a project that costs $1035725, has a seven-year life, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 41186 units per year. Suppose the projections giv..

Planning to take wine-tasting tour : Exchange rates Fred Nappa is planning to take a wine-tasting tour through Italy this summer. The tour will cost 2,750 euros (€) and includes transportation, hotels, and a guide. Fred estimates that round-trip airfare from his home in North Carolina t..

What will be remaining balance on mortgage after one year : The Jordan family recently purchased their first home. The house has a 15-year (180-month), $165,000 mortgage. The mortgage has a nominal annual interest rate of 7.75%. All mortgage payments are made at the end of the month. What will be the remainin..

Decided to sell new line of golf clubs : McGilla Golf has decided to sell a new line of golf clubs. The length of this project is seven years. The company has spent $1160456 on research and development for the new clubs. What is the NPV for this project?

Annual interest rate is built into monthly payment plan : Your child’s orthodontist offers you two alternative payment plans. The first plan requires a $4,400.00 immediate up-front payment. The second plan requires you to make monthly payments of 144.14, payable at the end of each month for 3 years. What no..

User Account

All Pages