What is the net present value of project

Assignment Help Financial Management

Reference no: EM132030727

Fairfax Paint is evaluating a 2-year project that would involve buying equipment for 120,000 dollars that would be depreciated to 50,000 dollars over 2 years using straight-line depreciation. Cash flows from capital spending would be 0 dollars in year 1 and 64,000 dollars in year 2. To finance the project, Fairfax Paint would borrow 120,000 dollars. The firm would receive 120,000 dollars from the bank today and would pay the bank $0 in 1 year and 125,916 dollars in 2 years (consisting of an interest payment of 5,916 dollars and a principal payment of 120,000 dollars). Relevant annual revenues are expected to be 118,000 dollars in year 1 and 114,000 dollars in year 2. Relevant annual costs are expected to be 38,000 dollars in year 1 and 29,000 dollars in year 2. The tax rate is 50 percent. The cost of capital is 6.26 percent and the interest rate on the loan would be 2.44 percent. What is the net present value of the project?

Please show your work

Reference no: EM132030727

Questions Cloud

Do you have for your doctoral studies director or advisor : After reviewing the handbook, what questions, if any, do you have for your Doctoral Studies Director or Advisor?

Coefficient of variation comes : Does that mean that the data in set B is more spread out than it is in set A? This is where the coefficient of variation comes into play.

What hypothesis test should you use for problem : Test the claim that the mean weight of Columbia River salmon is greater than 23 pounds. Use a a = 0.10 significance level.

Major differences between searching and sorting in java : What are the major differences between searching and sorting in Java? What are some of the differences in the techniques used in selection sorting.

What is the net present value of project : The cost of capital is 6.26 percent and the interest rate on the loan would be 2.44 percent. What is the net present value of the project?

Identify your target market and what segmentation criteria : Describe the organization, who are they, what industry they operate in, their mission and values, as well as what makes them different from other organizations.

What hypothesis test should you use for problem : Test the claim that the proportion of wins at home is greater than on the road. Use the a = 0.01 significance level.

Create a program that will store names in an arraylist : Create a program that will store 10 names in an ArrayList, ArrayList. The program must use selection sort to sort the names in order alphabetically.

Probability that the mean height for the sample : A random sample of 50 women in this age group is selected. What is the probability that the mean height for the sample is greater than 64?inches?

User Account

All Pages