What is the initial investment in the product

Assignment Help Financial Accounting
Reference no: EM132950099

Revenues generated by a new fad product are forecast as follows:

Year Revenues

1 $50,000

2 35,000

3 30,000

4 20,000

Thereafter0

Expenses are expected to be 40% of revenues, and working capital required in each year is expected to be 20% of revenues in the following year. The product requires an immediate investment of $60,000 in plant and equipment.

Required:

Problem a. What is the initial investment in the product? Remember working capital.

Problem b. If the plant and equipment are depreciated over 4 years to a salvage value of zero using straight-line depreciation, and the firm's tax rate is 20%, what are the project cash flows in each year? Assume the plant and equipment are worthless at the end of 4 years.

Problem c. If the opportunity cost of capital is 10%, what is the project's NPV?

Problem d. What is project IRR?

Reference no: EM132950099

Questions Cloud

What should be a good mission statement : 1. What is a VISION. Discuss Canadian Tire vision. In your opinion, is it good vision or bad vision? Why? elaborate in detail.
Calculate the wages expense for the financial year : Calculate the wages expense for the financial year ended 31 December 2020. A business records all transactions relating to the expense for wages
Describe difference between returns inwards and outwards : Describe the difference between share premium and share capital and explain how each of these items would be recorded in the ledgers of a company.
What are the managerial considerations : What are the "managerial considerations" surrounding the use of S&OP in a service environment?
What is the initial investment in the product : What is the initial investment in the product? Expenses are expected to be 40% of revenues, and working capital required in each year is expected.
How can you sustain the growth of a business : 1. As a future businessman, how can you sustain the growth of a business?
How different is the blue ocean strategy : How different is the Blue Ocean Strategy from the outpacing strategy
Examples of systems and processes that support innovation : Complete two (2) examples of systems and processes that support innovation, barriers and risks to innovation, and internal and external factors that impact inno
Relationship between sustainability and human rights : In the 21st century, what is the relationship between sustainability and human rights? How does this impact the development of new technologies?

Reviews

Write a Review

Financial Accounting Questions & Answers

  Financial statement analysis and preparation

Financial Statement Analysis and Preparation

  Shareholder of a company

Describe the ways that a person can become a shareholder of a company. Why Wal-Mart would split its stock?

  Financial and accounting principles

An understanding of financial and accounting principles can be a valuable tool for managers. While not all managers will find themselves calculating financial ratios or preparing annual financial data.

  Prepare a statement of cash flow using the direct method

Prepare a Statement of Cash Flow using the Direct Method and Prepare the Operations section of the Statement of Cash Flow using the Indirect Method.

  Financial accounting assignment

This assignment has one case study and two question apart from case study. Questions related to document Liquidation question and Company financial statements question - Torquay Limited

  Prepare general journal entries for goela

Prepare general journal entries for Goela Ltd

  Principles of financial accounting

Prepare the journal entry to record the acquisition of the assets.

  Prepare general journal entries to record the transactions

Prepare general journal entries to record the transactions, assuming use of the periodic inventory system

  Global reporting initiative

Compare the view espoused by the economist Milton Friedman about the social responsibilities of business with the views express by Stigler.

  Explain the iasb conceptual frameworks

Explain the IASB Conceptual Framework's perspective of users and their decisions.

  Determine the company''s financial statements

T he focus of the report is to determine the extent to which you are comfortable relying on the financial statements as presented by management .

  Computation of free cash flow

Computation of Free Cash Flow

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