What is the IRR of the new investment

Assignment Help Financial Management
Reference no: EM13803321

ABC Company is considering a new investment that will cost 50,000 to produce a new product that the president of the company has invented. The marketing dept of the company anticipates the new cash flows from the investment will be 10,000, 12,000, 12,000 12,000 and 10,000. The newly elected President of the United States has reinstituted the old investment tax incentive for a corporation which gives an investment tax credit of 10% of the cost of an investment applicable in the second year after implementation of the investment. It will cost the company 2000 to install the new equipment in the factor to get it going. The operations officer engineer thinks that the residual value of the equipment will be 10000. That maintenance costs will be 1000 in years 2 and 4 only. The corporate controller says that the accounting department has been using DDB appreciation for all new equipment. Assuming the company can sell bonds at 10% to pay for this investment, is this a good investment for the company? Whether or not, what is the IRR of the new investment?

Reference no: EM13803321

Questions Cloud

Market imperfection result in an optimal capital structure : The existence of market imperfection result in an optimal capital structure with- All debt, all equity, All equity and debt.
Two-year treasury security has a yield : A one-year Treasury security has a yield of 4.0000% and a two-year Treasury security has a yield of 4.8000%. Suppose the one-year security does not have a maturity risk premium, but the two-year security does and it is 0.4000%. What is the market's e..
What is the IRR of this project : XYZ wants to buy a new production machine for $20,000. Projected cash flows (already adjusted) from this investment will be 5,000; 4,000; 6,000; 6,000, and 6,000. The residual value of the machine is 500$, and t he company will receive the IRS ITC fo..
Incremental analysis : Andrusco Corp's new vice president of Finance, Mr Rufus, has discovered that a production machine authorized for purchase last year y his fired predecessor Mr. Miranda, is not functioning well on the production floor. Therefore he has decided and rec..
What is the IRR of the new investment : ABC Company is considering a new investment that will cost 50,000 to produce a new product that the president of the company has invented. The marketing dept of the company anticipates the new cash flows from the investment will be 10,000, 12,000, 12..
Zero salvage value with the SL method : Zero salvage value with the SL method. This machine will produce metal parts that will generate revenues of $180,000 (time zero dollars) per year. It is a policy of the company that the annual revenues will be increased each year to keep pace with th..
Circular flow diagram relates to current economic situation : Explain how the circular flow diagram relates to the current economic situation. Using the circular flow diagram, explain a way that your family interacts in the factor market and a way that it interacts in the products market.
What is a monopolist : What is a monopolist? Is the product unique or there are no close substitutes. Discuss What type(s) of decision does the monopolist make about pricing and the quantity of output to offer in the market? Can the monopolist determine the level of output..
Suppose the welfare benefit formula : Suppose the welfare benefit formula is, How large is the benefit if wages equal. What is the breakeven level of income in this case?

Reviews

Write a Review

Financial Management Questions & Answers

  What date is the end of the credit period for this invoice

Luggage World buys briefcases with an invoice date September28. The terms of sale are 2/10 EOM. What date is the end of the credit period for this invoice?

  Prepare a succinct statement

Prepare a succinct statement describing Robertson Tool's business risk, making critical judgments - How will the Robertson shareholders react to the results of the analysis

  What was the irr if the initial investment

The Cornballer, invented by George Bluth in the mid-1970s, is a device used to make cornballs. It sold for $29.95. Suppose that 10,000 Cornballers were sold in 1981; 11,000 in 1982; and sales increasing by 10% each year until it was last sold in 1990..

  Make-buy decisions on widgets

You are to write a 3-5 page summary to me as VP for Production, stating your observations of XYZ Manufacturing. In this memo, you will include: Make-Buy decisions on widgets and support your decision with made-up numbers.

  Question 1we have a first to default derivative written on

question 1we have a first to default derivative written on two obligors a and b. the survival probabilities are

  Higher operating leverage

In its 2009 annual report, The Coca-Cola Company reported sales of $30.99 billion for fiscal year 2009 and $31.94 billion for fiscal year 2008. The company also reported operating income (roughly equivalent to EBIT) of $8.23 billion in 2009 and $8.45..

  Prepare financial analysis

Prepare financial analysis of a chosen company Samsung Electronics a global telecommunications based company and the ticker symbol is Samsung Electronics Co.Ltd. SSNLF.

  You recently graduated from college and your job search led

you recently graduated from college and your job search led you to east coast yachts. since you felt the companys

  What is the sustainable growth rate

Frifeldt Farm just paid a dividend of $1,026, has a total equity of $21,650, total assets of $31,450, and a net income of $3,420. What is the sustainable growth rate?

  Calculate NPV and MIRR of pulley project

When considering including two pieces of equipment, a truck and an overhead pulley system, in this year's capital budget. The projects are independent. The cash outlay for the truck is $17,400, and that for the pulley system is $20,200.

  What was the inflation rate of airfare

As reported by the Bureau of Labor Statistics, the CPI for Airfare in 2263 was 583.9 (using a base year of 1914 = 100). The CPI for Airfare in 2264 was 615.8. Based on this data, what was the inflation rate of airfare from 2263 to 2264?

  An all equity firm generates cash flows

An all equity firm generates cash flows (CFFA) of $100 million every year in perpetuity. Based on the risk of the cash flows, a discount rate of 20% is appropriate for the firm. The firm is considering a project that will require an investment of $75..

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