What is the total cash flow of the project for year three

Reference no: EM13902568

The Volunteer Company (VC) produces electrical switching components and isconsidering manufacturing a new component that will require new equipment.The production of this component will require $1,500,000 in net working capital tostart and additional net working capital investments each year equal to 15percent of the projected sales increases for the following year. Total fixed costsare $1,350,000 per year, variable production costs are $225 per unit and theunits are priced at $345 each. The equipment needed to begin production has aninstalled cost of $23,000,000. The equipment is considered to qualify as sevenyearMACRS property. In five years, the equipment can be sold for 20 percent ofits acquisition cost. VC is in the 35 percent marginal tax bracket and has arequired return on all its projects of 18 percent. Based on the precedingproject estimates, answer the following questions:Questions

A. What is the total cash flow of the project for Year 3?

B. What is the NPV of the project?

C. What is the IRR of the project?

D. Should VC begin this project? Explain

Reference no: EM13902568

Questions Cloud

Efforts to reclaim the vehicles from the later buyers : Clarence Jr., owned Hope Automotive, a car dealership in New Jersey. Hope sold a truck to Loyd, who signed a note for the amount of the price payable to National Bank in six months. Before the note came due, Loyd returned the truck to Hope Automotive..

Probability that this inspector will reject golf ball : Management of a golf ball company has carefully screened and selected 12 dozen golf balls, and it is agreed that this sample contains 15 nonconforming balls (all for various cosmetic reasons). The balls are given to an inspector for classification in..

Compute lok''s total asset turnover : Exercise 10 22 Evaluating efficient use of assets A1 Lok Co. reports net sales

How do these organizations differ in the effort for safety : What were the driving forces behind the creation of the FAA and ICAO? This question is pertaining to the airline versus FAA safety responsibilities. How do these organizations differ in the effort for safety?

What is the total cash flow of the project for year three : What is the total cash flow of the project for Year 3? What is the NPV of the project? What is the IRR of the project? Should VC begin this project? Explain

Different level of data available under the campaign tab : Adword tools. Name and describe the function of at least 3 different tools available to advertisers when running an Adwords campaign? What does CTR stand for and why is it so important in the bedding process? How are paid results determined by Google..

What are a business''s responsibilities to its employees? : What are a business's responsibilities to its employees?

What is the marginal product of capital : The marginal product of labor in the production of computer chips is 50 chips per hour. The marginal rate of technical substitution of hours of labor for hours of machine capital is 1/4. What is the marginal product of capital?

Competitive advantage is built almost entirely : Consider a firm whose competitive advantage is built almost entirely on its ability to achieve economies of scale in producing small electric motors that are used by the firm to make hair dryers, fans, vacuum cleaners, and food processors.

User Account

All Pages