What is the net present value of this project

Assignment Help Financial Accounting
Reference no: EM132994888

Question - You are thinking about opening a car dealership. You bought some real estate last year for $700,000 which you will use for the dealership. The market value of this real estate today is $1,200,000. To build the necessary showroom and shop it will cost you $600,000, a cost which you will depreciate over 3 years. You estimate an increased need for net working capital in year zero in the amount of $40,000 which will be recovered at the end of the project. From your dealership you expect to generate annual revenues of $700,000 and have operating expenses of $200,000, and you have a 30% tax rate. Bank of America has offered to lend you $850,000 at an interest rate of 6% to be repaid over 5 years. If your cost of capital (discount rate) is 10%, what is the net present value of this project?

(A) $1,049,662

(B) -$790,338

(C) $359,662

(D) -$570,000

(E) -$850,443

(F) -$616,258

Reference no: EM132994888

Questions Cloud

What will be the amount in Dallas capital account : The capital balances before the sale were 240,000 and 360,000 respectively. What will be the amount in Dallas' capital account
Explain the weighted average cost of capital : Explain the weighted average cost of capital (WACC) and its significance and include hypothetical examples for better clarity
What is a new policyholders probability : The annuities pay $60 000 at the end of each year while the policyholder is alive. What is a new policyholder's probability of dying in Year 3
Clearly discuss what operating budgets look like : Clearly discuss what operating budgets look like for merchandising, service, and not-for-profit organizations
What is the net present value of this project : From your dealership you expect to generate annual revenues of $700,000 and have operating expenses of $200,000, What is the net present value of this project
Determine the number of current ratio as of December : The following financial information is for Chesapeake Corporation are for the fiscal years - Determine the number of current ratio as of December
What is the management accountant role in setting price : Management decided that the required markup is 40%. What is the management accountant's role in setting price of a new product
What equal monthly payments will pay off the debt : Lynn Anglin owes a debt of $40,000 from the purchase of her new sport utility vehicle. What equal monthly payments will pay off the debt
What is sandhill direct materials price variance : Sandhill budgeted $0.79 per switch but had to pay $0.34 per switch. What is Sandhill's direct materials price variance for the period

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