What is the net present value of investment

Assignment Help Finance Basics
Reference no: EM132569570

A company will sell Gizmos to consumers at a price of $97 per unit. The variable cost to produce Gizmos is $49 per unit. The company expects to sell 19,000 Gizmos to consumers each year. The fixed costs incurred each year will be $150,000. There is an initial investment to produce the goods of $3,700,000 which will be depreciated straight line over the 16 year life of the investment to a salvage value of $0. The opportunity cost of capital is 5% and the tax rate is 34%.

a) Using the an annual operating cash flow of $581,545, what is the net present value of this investment?

b) Should the company accept or reject this project?

Reference no: EM132569570

Questions Cloud

Define a private placement and a rights issue : Contrast in detail the advantages and disadvantages of a listed company using a rights issue rather than a private placement when raising additional equity capi
Estimate the terminal value of this business : Using the following information, estimate the value of Scatter Advertiser Ltd, an e-commerce start-up company:
Explain what will be the resulting percentage change in ebit : Explain What will be the resulting percentage change in EBIT if they expect units sold to changes by -2.2 percent? The Poseidon Swim Company produces swim trunk
Give reasons for issuing the particular audit opinion : An auditor is engaged to audit a client's financial report after the annual physical inventory count. Give reasons for issuing the particular audit opinion
What is the net present value of investment : A company will sell Gizmos to consumers at a price of $97 per unit. The variable cost to produce Gizmos is $49 per unit. The company expects to sell 19,000
How to compute degree of operating leverage for the level : How to Compute the degree of operating leverage for the level of production and sales 484 swim trunks. Round the answer to two decimal places
Interest rate is compounded semi-annually : You borrow $10,000 to be paid off in equal weekly payments over the next 2 years. The interest rate is 8% compounded semi-annually. Find the payment.
Describe the difference between story and plot : Describe the difference between Story and Plot. Give a clear example from Singin' in the Rain of a plot element that wouldn't be part of the Story.
How do information systems affect market efficiency : How do information systems affect Market Efficiency?

Reviews

Write a Review

Finance Basics Questions & Answers

  Increase the size of the deposits

You deposit $2000 on your daughter's first birthday and plan to increase the size of the deposits by 5% each year.

  Create a dummy balance sheet

Create a dummy Balance Sheet of your own with dummy values of Assets and Liabilities and show the accounting treatment

  Ignoring settlement risk and assuming option premiums are

your company has reached its credit limit to ford but ford is insisting that your firm provide them some increased

  What is the effective annual rate of interest

Company X sells on a 1/10, net 90, basis. Company Y buys goods with an invoice of $4,000.

  What is the cash flow to stockholders

During the year, the company sold $75 worth of common stock. What is the cash flow to stockholders?

  How much is the stock worth to you

It will pay no dividends after that. If you require a rate of return of 14 percent from stocks in this risk class, how much is the stock worth to you?

  Give an intuitive explanation of why the early exercise of

give an intuitive explanation of why the early exercise of an american put becomes more attractive as the risk-free

  Is the tax deductible

What is the toatl dollar call premium required to call the old issue? Is the tax deductible? What is the net after-tax cost of the call?

  The preferred stock of ciso inc pays an annual dividend of

the preferred stock of ciso inc. pays an annual dividend of 6.50 a share and sells for 48 a share. what is cisos cost

  Would you say the firm is on solid financial ground

Select a company that has been public for at least three years (Kohl's Corporation). Take a look at its financial statements. What do you notice?

  Determining the first year of the bond life

The bond matures in 20 years. What is the implicit interest, in dollars, for the first year of the bond's life? Assume semiannual compounding.

  Strong online distribution of the inteview

Based on our discussions of how investors value stocks/bonds, which direction do you think this company's stock price would move

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