Should the investment to be undertaken

Assignment Help Finance Basics
Reference no: EM13269425

A firm considers building a new and improved production facility for one of its existing products. It would be built on a piece of vacant land that the firm owns. This land was acquired four years ago at a cost of $200,000; it has a current market value of $1,000,000. The building can be erected for $350,000. Machinery worth $150,000 needs to be bought. Capital cost allowances on a declining balance will be taken on all depreciable assets at a rate of 20 percent. Operating savings from the new production facility are expected to be $300,000 per year for the next 10 years. The salvage value at the end of the 10 years is expected to be $1,500,000, which is solely the value of the land. The firm's tax rate is 40 percent, and the firm's discount rate is 15 percent.

Question: Based on a discounted cash-flow analysis, should the investment to be undertaken?

 

Reference no: EM13269425

Questions Cloud

What is the rms value of the largest sin-wave input : An amplifier with 40 dB of small-signal open-circuit voltagegain, an input resistance of 1M-ohm ,and an output resistance10-ohm drives a load of 100-ohm .What voltage and power gains(expressed in dB) would you expect with the load connected
Discuss the importance of revenue cycle management : Discuss the importance of revenue cycle management, and address the major components of this organizations revenue cycle. Evaluate any specific challenges that the organization might face.
What is the population of interest of the survey : According to a recent survey of 500 randomly selected residents of popular city, it was found that 38% are in favor of raising city taxes in order to build a new stadium for the local baseball team.
How much heat does the cup absorb : A 390 g glass coffee cup is at a room temperature of 20?C. It is then plunged into hot dishwater at 80 ?C. how much heat does the cup absorb
Should the investment to be undertaken : Based on a discounted cash-flow analysis, should the investment to be undertaken?
Calculate the width of the dark area : A diffraction grating has 4272 lines/cm. Calculate the width of the dark area between the first and second order spectra on a screen 3.3 m away
Discuss the ethical responsibilities of an advertiser : Identify and discuss the ethical responsibilities of an advertiser, including the legal and regulatory perspective. Assess what the industry has done to meet those responsibilities, giving a specific example
Explain the number of grams of water required to dissolve : The number of grams of water required to dissolve a mixture containing 15 g of KNO3 and 3.5 g CuSO4 * 5 H2), assuming that the solubility of one substance is not affected by the presence of another
Design an elevator controller for simple two-floor elevator : Design an elevator controller for a simple two-floor elevator. On the 1st floor, there is only an up button, and on the 2nd floor, there is only a down button. Within the elevator, there are two buttons: door open and door close.

Reviews

Write a Review

Finance Basics Questions & Answers

  Choosing best alternatives

Two Projects are being considered through a company are mutually exclusive and have the given projected cash flows; Based on the information, determine which of the two projects would be preferred?

  Profitability index for project

The project is estimated to generate 2,640,000 in annual sales, with costs of 1,056,000. The tax rate is 30 % and the required return for the project is 15%. What is NPV, IRR, Payback, and Profitability Index for project ?

  What is the yield for a 90-day t-bill with a price

What is the price of a 6-month Treasury Bill with a stated yield of 2.50%?

  Find the intrinsic value of a common stock

Find the intrinsic value of a common stock that last paid a quarterly dividend of $.03 if there is no expected increament in dividends and your required rate of return is 10 percent.

  Determine pay for the stock

The National Motor Corporations last dividend was $1.25 and the directors expect to maintain the historic 4 percent yearly rate of growth. You plan to purchase the stock today because you feel that the growth rate will increase to 7 percent.

  What is the current bond price

Lycan, Inc., has 7.3 percent coupon bonds on the market that have 7 years left to maturity. The bonds make annual payments. If the YTM on these bonds is 9.3 percent, what is the current bond price?

  What are the investment options for retirement plans

What are the Investment options for retirement plans and How much money will she need to withdraw each year starting at age 65

  How much would the donor have to provide

The city anticipates that it can earn 5% on the investment and would name the park for the donor. How much would the donor have to provide?

  Computation of issue of debt and return on equity

Computation of issue of debt and return on equity thus it expects to use this money and increase sales such that the income before interest and taxes

  What is the amount of the depreciation expense

Black River Adventures has net income of $1,718, interest expense of $815, sales of $19,950, and costs of $11,080. What is the amount of the depreciation expense if the firm's tax rate is 35 percent?

  What is the economic rationale for a fee schedule

What is the economic rationale for a fee schedule that declines (in percentage terms) with increases in assets under management?

  Calculation of irr, npv and analysis in decision making

Calculation of IRR, NPV and analysis in decision making and how can the use of Net Present Value assist in the measurement and evaluation of corporate projects to ensure that stakeholder interests are being met

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