What is the projected npv for the investment

Assignment Help Cost Accounting
Reference no: EM13546351

The Clayton Manufacturing Company is considering an investment in a new automated inventory system for its warehouse that will provide cash savings to the firm over the next five years. The firm's CEO anticipates earnings before interest, taxes, depreciation (EBITDA) from cost savings equal to $200, 000 for the first year of the operation of the center; over the next four years, the estimate that this amount will grow at the rate of 5% per year. The system will require an initial investment of $800,000 that will be depreciated over the a five year period using the straight-line depreciation of $160,000 per year and a zero estimated salvage value.

a) Calculate the project's annual free cash flow (FCF) for each of the next five years, where the firm's tax rate is 35%.

b) If the cost of capital for the project is 12%, what is the projected NPV for the investment?

c) What is the minimum year 1 dollars savings (i.e., EBITDA) required to produce a breakeven NPV = 0?

Reference no: EM13546351

Questions Cloud

What will the buoyant force on the crown be : The density of gold is 19 times that of water. If you take a gold crown weighing 30N and submerge it in water, what will the buoyant force on the crown be
How many volts will appear across the secondary : A transformer consists of a 500 turn primary coil and a 2000 turn secondary coil. if 120v is applied to the primary, how many volts will appear across the secondary
Write a c program generates a ordered sequence of random num : Write a C program Gen.c that generates a ordered sequence of 20 random numbers within a range of 1000 to 9999. The program is invoked by a command line % gen datfile1
What was the angular velocity of the shoulder joint : A .8 meter tennis racket is swung by a player with an arm length of .7m. what was the angular velocity of the shoulder joint
What is the projected npv for the investment : Calculate the projects annual free cash flow (FCF) for each of the next five years, where the firms tax rate is 35% - What is the projected NPV for the investment?
What is the induced emf during this interval : A coil with a self inductance of .75 mH experiences a constant current build up fro zero to 5.0A in .125s. what is the induced emf during this interval
Prepare a complete multiple-step income statement : Prepare a complete multiple-step income statement for the company (showing both gross profit and income from operations). Show all computations.
What emf is induced across the ends of the wire : A.2m wire is moved perpendicular to a.5magnetic field at a speed of 1.5m/s. what emf is induced across the ends of the wire
What is the speed and direction of stone : A curling stone with a mass of 7 kg moves across the ice at a speed of 1.35 m/s in the positive x direction. What is the speed and direction of stone 2 after the collision

Reviews

Write a Review

Cost Accounting Questions & Answers

  You are to read the report the case for global accounting

you are to read the report the case for global accounting standards by professor ann tarca uwa and analyse what the key

  Show the appropriate journal entries to be made

A decision was made to refund the remaining unearned ticket revenue to its ticket holders, and this was done on July 20. Show the appropriate journal entries to be made on April 15, June 30, and July 20. Rialto has a June 30th yearend.

  Prepare a bank reconciliation for laymon boat company

Prepare a bank reconciliation for Laymon Boat Company at September 30 and prepare any adjusting entries necessary as a result of the bank reconciliation.

  Zarcus decides to withdraw from the partnership

Goering, Zarcus, and Schmit are partners and share income and loss in a 3:2:5 ratio. The partner-ship''s capital balances are as follows: Goering, $84,000;

  What is value of these bonds when required interest rate

What is the value of these bonds when the required interest rate is 5 percent, 10 percent, and 15 perrcent and why is the price of Bond L more sensitive to interest rate changes than the price of Bond S?

  Reorganization gain - loss and basis determination

Describe whether this transaction meets the requirements for a "Type C" reorganization, this transaction the qualifications of a "Type C" reorganization.

  Prepare the closing entries for the above accounts

Sales Discounts $3,600, Cost of Goods Sold $110,000, Rental Revenue $6,000, Freight-out $1,800, Rent Expense $8,800, and Salaries and Wages Expense $22,000. Prepare the closing entries for the above accounts.

  Revenues and expenses defined under accrual accounting

Explain the difference between the accrual basis of accounting and the cash basis of accounting. What are the major reasons for accrual accounting? How are revenues and expenses defined under accrual accounting?

  Compute the budgeted cash payment for purchases

Purchases will be made in 12 equal monthly amounts and paid for in the following month. Compute the budgeted cash payment for purchases of Calvos for 2010.

  Determine the activity rate for each activity

Why aren't the activity unit costs equal across all three products since they require the same machine time per unit?

  Determine the ending inventory and cost of goods sold

Determine the ending inventory and the cost of goods sold under each of the assumed cost flow methods

  Why did the unadjusted trial balance in balance

Why did the unadjusted trial balance in balance and journalize the correcting entry. (c) Is this error a transposition or slide?

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