The gap is considering buying cash register software

Assignment Help Financial Management

Reference no: EM131444243

The Gap is considering buying cash register software from Microsoft so that it can more effectively deal with its retail sales. The software package costs $750,000 and will be depreciated down to zero using the straight-line method over its five-year economic life. The marketing department predicts that sales will be $600,000 per year for the next three years, after which the market will cease to exist. Cost of goods sold and operating expenses are predicted to be 25 percent of sales. After three years the software can be sold for $40,000. The Gap also needs to add net working capital of $25,000 immediately. The additional net working capital will be recovered in full at the end of the project life. The corporate tax rate for the Gap is 35 percent and the required rate of return relevant to the project is 17 percent. What is the NPV of the new software?

Reference no: EM131444243

Questions Cloud

Evaluating the proposed acquisition of new milling machine : The Campbell Company is evaluating the proposed acquisition of a new milling machine. The machine’s base price is $108,000 and it would cost another $12,500 to modify for special use. The machine will be depreciated straight-line to zero over the thr..

Horizontal and vertical analyses : Choose a publicly traded company. Download the latest available financial reports (balance sheet, income statement, statement of cash flows, and statement of owners' equity). CLO1, CLO2, CLO3, CLO4 Activities: Draw two (2) graphs either on paper or i..

Planning for retirement in exactly years : Mickie and Minnie (M&M) are planning for retirement in exactly 30 years. At the beginning of each retirement year for 26 years, M&M want to be able to withdraw $64,000 in "real" dollars. What yearly amount must they deposit (for each year of the 30 y..

Define horizontal analysis : Define "horizontal analysis”: step-by-step instructions on how to do it and why it is used. Please give two numerical examples. State if it has improved, deteriorated, or unchanged.

The gap is considering buying cash register software : The Gap is considering buying cash register software from Microsoft so that it can more effectively deal with its retail sales. The software package costs $750,000 and will be depreciated down to zero using the straight-line method over its five-year..

Calculate the macaulay duration for the bond : A $1000 par value bond with 5 years to maturity and a 6% coupon has a yield to maturity of 8%. Interest is paid semiannually. Calculate the current price of the bond. Calculate the Macaulay duration for the bond.

How much do you have to invest in nominal terms : Your current age is 22 and you plan to retire at age 67. At retirement you want to have a “nest egg” of $2 million in today’s buying power. Over that time-period you expect inflation to average 3% per year. If you can earn 4.6% APR, compounded monthl..

Alternate offering prices on the existing price per share : Brady Company has 65,000 shares of stock that each sell for $37. Suppose the company issues 8,000 shares of new stock at the following prices: $37, $23, and $16. What is the effect of each of the alternate offering prices on the existing price per sh..

Project is of similar risk to the firms existing operations : Bubba's Bowling Inc. needs to purchase equipment for its 2.000 bowling alleys The total cost of the equipment is $2 million. It is estimated that the before-tax cash inflows from the project will be $328, 125 annually in perpetuity. Assume the projec..

User Account

All Pages