User Account

All Pages

What is the present value of the operating cash flows

Assignment Help Finance Basics
Reference no: EM133110467

Roask Conference Centre is considering investing in some new audio visual equipment. The required equipment has a 7-year life. Also, some new working capital would be required and would be recovered at the end of the project's life. Revenues and cash operating costs are expected to be constant over the project's 7-year life. Additional information is as follows:

  • WACC = 13%
  • Tax rate = 35%
  • CCA rate = 30%
  • Net capital investment in fixed assets = $650,000
  • Required new working capital = $30,000
  • Sales revenues, each year = $580,000
  • Cash operating costs, each year = $330,000
  • Expected salvage value in year 7 = $0
  • PV of Capital Cost Allowance Tax Shield = PVCCATS = 149,590.97

Find the NPV and recommend whether the project should be accepted. Show your work.

a) What is the present value of the operating cash flows (after tax)?

b) What is the present value of the ending cash flows?

c) Find the NPV and what is the project decision?

Reference no: EM133110467

Questions Cloud

Calculate the duration gap for the bank : Assume that the First National Bank has the balance sheet shown below, the income gap is currently -$17.5 million, and that interest rates are initially at 10%.
Predict the effect of changes in all financial metrics : For a for-profit organization is considered to be Pfizer. Below information what on the metrics for this organization:
Calculate the final values of investments : You are looking at to invest $100,000 for the 12 years. You have already identified two possible mutual funds:
What is the after tax cost of debt : Supposed we have a bond issue currently outstanding that has 18 years left to maturit. The coupon rate is 7% and coupons are paid semiannually. The bond is curr
What is the present value of the operating cash flows : Roask Conference Centre is considering investing in some new audio visual equipment. The required equipment has a 7-year life. Also, some new working capital wo
Literature review - effectiveness of marketing technologies : Literature review on The effectiveness of marketing technologies in football management in Nigeria
How could compaq hedge payable : Compaq Computer has a SF 1 million payable in 30 days. Suppose Compaq can borrow in U.S. at 0.7% and invest in Switzerland at 0.5% for 30 days. How could Compaq
What is the intuition behind consistency : What is the intuition behind "consistency" when employing the multiplicity of valuation models?
What is john annualized holding period return : What is John annualized holding period return assuming the coupons were reinvested at 9 percent?

Reviews

Write a Review

Finance Basics Questions & Answers

  Functions of the banking system

Based on the functions of the banking system, give reasons why governments bail out banks during an economic crisis?

  What is the cost of the portfolio

Consider the following portfolio: - Long 3 calls with strike price 98.0 and price 21.278 - Short 0 calls with strike price 98.0 and price 21.278.

  Full-time employees in order to preserve profits

Papa John's, a leading family style pizza restaurant chain, decided they would cut full-time employees in order to preserve profits at the restaurant chain.

  How many units does jeanne need to sell to break even

Jeanne Co. has annual fixed costs of $200,000 and variable costs of $2/unit for a product that sells for $12 unit. How many units does Jeanne need to sell to break even?

  What is the project npv

If the firm's WACC is 9%, what is the project's NPV? Round your answer to the nearest cent. Do not round your intermediate calculations.

  How would characterize cdk digital core competencies

What misalignment(s) caused channel conflict between manufacturers and dealers in the automotive industry? How was this conflict reflected in the attitudes

  What should be your strategy under such scenario explain

Due to the bullish trend of the market in underlying stock of option which is trading at $75. Based on the market estimate

  What is the current ratio what does the current ratio

what is the current ratio? what does the current ratio measure? what are reasons for using the current ratio for

  Briefly trace development from a sole proprietorship

Imagine a startup company of your own and briefly trace its development from a sole proprietorship to a major corporation with a focus on how that development would be financed.

  Compute helio’s ending inventory and net income for 2011

Many of the items in the company's inventory at the end of 2011 were judged to be outdated, and on average the market value of the remaining inventory was estimated at $1.50 per item.

  What effects of a tax imposed on sellers of tobacco products

Illustrate using the demand and supply model, the effects of a tax imposed on sellers of tobacco products. Explain in detail who pays the tax

  Discuss the uses and limitations of break-even analysis

Discuss the uses and limitations of break-even analysis from the view of a toy car manufacturer.

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!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd