Required rate of return to evaluate projects of this nature

Assignment Help Financial Management
Reference no: EM131453543

Mars Inc. is considering the purchase of a new machine which will reduce manufacturing costs by $5,000 annually. Mars will use the MACRS accelerated method to depreciate the machine, and it expects to sell the machine at the end of its 5-year operating life for $10,000. The firm expects to be able to reduce net operating working capital by $15,000 when the machine is installed, but required net working capital will return to the original level when the machine is sold after 5 years. Mars's marginal tax rate is 40 percent, and it uses a 12 percent required rate of return to evaluate projects of this nature. If the machine costs $60,000, what is the NPV of the project? (Show all your work)

a.) -$15,394

b.) -$14,093

c.) -$58,512

d.) -$21,493

e.) -$46,901

Reference no: EM131453543

Questions Cloud

Insurance policies place on corporate aviation : What constraints do insurance policies place on corporate aviation?
Analyze the need for comprehensive vulnerability : Analyze the need for comprehensive vulnerability assessment strategy. Identify academic sources for information on IAS vulnerability assessment strategies
How you set up the line : This week you are going to design and balance an assembly line. We are going to take the simple task of making cupcakes, break the work up into stations.
What is the difference between capitation and ffs : Evaluate the key advantages and disadvantages of each system from the point of view of a managed care plan and the hospital?
Required rate of return to evaluate projects of this nature : Mars's marginal tax rate is 40 percent, and it uses a 12 percent required rate of return to evaluate projects of this nature.
Analyze the process to be used in project to convert data : The inefficiencies surrounding the project. Analyze process to be used in the project to convert data to a monetary value. How this information will be used?
Targeted versus mass marketing : Think of a product you believe is mass marketed. How did you arrive at this conclusion? You might want to comment on classmates' posts.
Identify a non-nursing theory : NR 501: Select a nursing practice area - nursing education; then identify a non-nursing theory and apply it to the nursing practice area you have.
What are the benefits of public health assessments : What are the benefits of public health assessments? What are the disadvantages, if any. How can public health assessments be used to form public policy

Reviews

Write a Review

Financial Management Questions & Answers

  What is the present value of the break-even point

Luke Athletics Inc. has purchased a $200,000 machine to produce tennis balls. The machine will be fully depreciated by the straight-line method for its economic life of five years and will be worthless after its life. What is the present value of the..

  How much will the equal monthly payments

You want to buy a car. To do so, you will need to take out a loan in the amount of $19,000. The longest you are willing to pay on the loan is five years. The interest rate on this type of loan is 5.0% per year. How much will the equal monthly payment..

  Question 1 describe vernons product life-cycle theory of

question 1. describe vernons product life-cycle theory of fdi. what are the strength and weakness of the

  What is the gross profit margin

If sales are EUR 24,000 and cost of sales is EUR 18,000, then what is the gross profit margin?- Sales are EUR 30,000 and gross profit margin is 20 per cent. What is cost of sales?

  What is the amount of the firms net fixed assets

Ratios and Fixed Assets - The Le Bleu Company has a ratio of long-term “debt ratio” .35 and a current ratio of 1.25. Current liabilities are $950, sales are $5,780, profit margin is 9.4 percent, and ROE is 18.2 percent. What is the amount of the firm..

  Annual yield assuming the investment was held to maturity

An investor is looking to buy a $1,000,000 T-bill issue at an Ask Discount of 1.13 on January 22 for a maturity date of February 27 (36 days to maturity), what is the discount rate, dollar discount, purchase price, and the holding period yield and an..

  Law requires that all brokers have an initial margin

Suppose that you have $82,500 to invest and would like to purchase 1500 shares of ABC Corp's shares which are currently trading for $100.00 per share. Law requires that all brokers have an Initial margin of 50% but your broker demands a 55% initial m..

  Pension plan is obligated to make disbursements

A pension plan is obligated to make disbursements of $1.3 million, $2.3 million, and $1.3 million at the end of each of the next three years, respectively. Find the duration of the plan's obligations if the interest rate is 12% annually.

  Assess performance based on service-quality and cost

Which of the following is a measure developed by successful firms to focus on customer requirements and to assess performance based on service, quality, and cost?

  What is the required rate of return for this investment

The return on the market is 9.5% and the risk free rate is 3%. The investor is aggressive and his beta (B) is 1.25. What is the required rate of return for this investment using the CAPM approach? If you are a strict risk minimize, which stock from b..

  Summary of the four elements of financial management

Include a summary of the four elements of financial management. Include a summary of generally accepted accounting principles and general financial ethical standards

  Research project and presentation of commodity

Please complete a research project and presentation of a commodity, its global implications and all other relevant information. Collect information and data on all relevant aspects of the commodity. That information should include but not be limited ..

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