What is the profitability index of the project

Assignment Help Financial Management

Reference no: EM131535115

Company XYZ has spent $250,000 to develop a new product – smart beehive. The company has spent $24,000 for a market research for figuring out the expected demand for the beehives. Company XYZ can manufacture the beehives for $2200 each in variable costs. Fixed costs are estimated to be $1.2 million per year. The estimated sales volume is 2000, 2400, 2800, 3400, and 3400 units per year for the next five years, respectively. The unit price of the beehive will be $3900. The necessary equipment for producing the beehives can be purchased for $8.2 million and will be depreciated on a seven-year MACRS schedule. It is believed the value of the equipment in five years will be $1.4 million. The need for the net working capital for producing the beehives will be 20 percent of next years sales. Company XYZ has a 35 percent corporate tax rate and a 12 percent required return.

1. What is the payback period of the project?

2. What is the profitability index of the project?

3. What is the IRR of the project?

4. What is the NPV of the projec

Can someone answer with proper explanations to each part? There are currently two different versions with different answers

Reference no: EM131535115

Questions Cloud

What is the present value of this annuity : You believe that the interest rate over this 1 period will remain fixed at 5% per annum. What is the present value of this annuity.

What will be total interest that you will be required to pay : what will be the size of your annual repayments? What will be the total interest that you will be required to pay?

About any issues relating to health care coverage : During the period 1960 through the 1990s one never heard very much about any issues relating to health care coverage in the United States.

What will be standard deviation of your portfolio : the U.S. treasury fund to achieve your goal of 13% rate of return with lowest possible standard deviation? What will be standard deviation of your portfolio?

What is the profitability index of the project : What is the payback period of the project? What is the profitability index of the project? What is the IRR of the project?

What are the fixed and variable cost of havana pantaloons : For the black and stripes together, what are the fixed and variable cost of the Havana pantaloons? Jack's discount rate is still 18%.

Revenues and costs that differ are relevant : Revenues and costs that differ are relevant and should be considered in incremental analysis

Sufficiently general to handle the case of zero growth stock : The constant growth model is sufficiently general to handle the case of a zero growth stock, where the dividend is expected to remain constant over time.

What should be the price of the company stock today : Using the dividend growth model. what should be the price of the company's stock today

User Account

All Pages