Sausage system with an installed cost

Assignment Help Financial Management

Reference no: EM13911468

Kolby’s Korndogs is looking at a new sausage system with an installed cost of $765,000. This cost will be depreciated straight-line to zero over the project’s six-year life, at the end of which the sausage system can be scrapped for $100,000. The sausage system will save the firm $188,000 per year in pretax operating costs, and the system requires an initial investment in net working capital of $46,000.

Required:

If the tax rate is 35 percent and the discount rate is 7 percent, what is the NPV of this project?

Reference no: EM13911468

Questions Cloud

Firms increased-decreased or remained unchanged : Change in Cost of Capital. Assume that Naperville Co. will use equity to finance a project in Switzerland, while Lombard Co. will rely on a dollar-denominated loan to finance a project in Switzerland, and Addison Co. will rely on a Swiss franc-denomi..

Campbell soup company annual report in the appendix : Calculate the rate of change in the annual dividend per share for each of the years from 2008 through 2011.

Stock is divided between capital gains-dividend yield : Suppose you know that a company’s stock currently sells for $65.30 per share and the required return on the stock is 9 percent. You also know that the total return on the stock is evenly divided between capital gains yield and dividend yield. If the ..

Calculate stock dividend shares and cash dividend amounts : Calculate stock dividend shares and cash dividend amounts. Assume that you own 4,000 shares of Blueco, Inc.'s, common stock and that you currently receive cash dividends of $0.84 per share per year.

Sausage system with an installed cost : Kolby’s Korndogs is looking at a new sausage system with an installed cost of $765,000. This cost will be depreciated straight-line to zero over the project’s six-year life, at the end of which the sausage system can be scrapped for $100,000. If the ..

Common and preferred stock issuances and dividends : Common and preferred stock issuances and dividends. Permabilt Corp. was incorporated on January 1, 2013, and issued the following stock for cash:4,000,000 shares of no par common stock were authorized;

What is the YTM of the convertible mortgage : Bob is considering acquiring a commercial property for $100,000. He expects the property will generate NOIs of $10,000 in year 1, $11,000 in year 2, $12,000 in year 3 and $12,500 in year 4. He wants you to do a three-year cash flow simulation. At the..

What is their current ratio : Food Products, Inc. has cash of $2 million, short-term investments of $3 million, accounts receivable of $4 million, inventory of $5 million and plant, property, and equipment of $ $6 million. It’s current liabilities = $10 million and it’s total lia..

Using the present worth on incremental investment : It is estimated that the annual heat-loss cost in a small power plant is $5,200. Two mutually exclusive proposals have been formulated that will reduce the loss. If the interest rate is 8% and the plant will benefit from the reduction in heat loss fo..

User Account

All Pages