What is the total initial cash outflow

Assignment Help Finance Basics
Reference no: EM133001241

A corporation is considering investing in a new product line. The annual revenues (sales) for the new product line are expected to be $355,247.00 with variable costs equal to 50% of these sales. In addition annual fixed costs associated with this new product line are expected to be $66,351.00 . The old equipment currently has no market value. The new equipment cost $89,510.00 . The new equipment will be depreciated to zero using straight-line depreciation for the three-year life of the project. At the end of the project the equipment is expected to have a salvage value of $34,268.00 . An increase in net working capital of $55,099.00 is also required for the life of the project. The corporation has a beta of 1.286 , a tax rate of 41.04% , and a target capital structure consisting of 44.91% equity and 55.09% debt. Treasury securities have a yield of 2.95% and the expected return on the market is 8.30% . In addition, the company currently has outstanding bonds that have a yield to maturity of 7.22%.

1. What is the total initial cash outflow? (show as negative number

2. What are the estimated annual operating cash flows?

3. What is the terminal cash flow?

4. What is the corporations cost of equity?

e) What is the WACC?

f) What is the NPV for this project?

Reference no: EM133001241

Questions Cloud

What is the npv : A project your small business is considering requires an investment today of $260,000. One year from today (t = 1) through 9 years from today (t = 9) it is expe
What is the estimated value per share of boehm stock : The dividend is expected to grow at a constant rate of 4% a year. The required rate of return on the stock, rs, is 11%. What is the estimated value per share of
Reconcile number of physical units worked on during period : Reconcile the number of physical units worked on during the period. Work in process, April 30 (100% complete for materials, 20% for conversion) 81,500 units
Loan structure options : 1. Cross collateralisation as one or more loans are secured by more than one property
What is the total initial cash outflow : A corporation is considering investing in a new product line. The annual revenues (sales) for the new product line are expected to be $355,247.00 with variable
Retirement savings plan investment opportunity : Mr. Paul is at the age of 25, and his friend David (an insurance/mutual fund broker) offered him a retirement savings plan investment opportunity. Please help P
Solve cost per equivalent unit using weighted-average method : Solve cost per equivalent unit using the weighted-average method. 14,800 in beginning inventory that are 100 percent complete for materials
Size of the investment required : Bukas Palad Corporation is in wholesale business. The manager in charge is taking care of all the operations. The branch in Davao is earning a lot of revenue th
Announcements and security prices : Suppose the government announces that, based on a just-completed survey, the growth rate in the economy is likely to be 3 per cent in the coming year, as compar

Reviews

Write a Review

Finance Basics Questions & Answers

  Calculating the company wacc

Jabila Corporation is an all equity company with common and preferred shares. There are 600,000 common shares outstanding. Currently the common shares have.

  You want to withdraw 3000 once year at the end of each year

you want to withdraw 3000 once year at the end of each year for 5 years starting 3 years from and ending 7 years from

  Determine the dol of firm

The following are from the production statements of LMNO, Corporation Determine the DOL of this firm?

  Strategic plan affects the design of its rewards system

Explain whether there is a direct connection between the mission and values of the organization and its compensation system. If so, what is it? If not, why

  Prepare reformulated income statement that distinguish items

Basic Calculations (Easy) The following numbers were extracted from a balance sheet (in millions).

  Estimate the cost of equity

Malitz Inc. recently hired you as a consultant to estimate the company's WACC. You have obtained the following information.

  Differences between capital and operating leases

Purchase vs. Leasing. not a paper.Scenario: Many companies choose to lease equipment, automobiles, etc. in lieu of purchasing the items.

  How much would you have to deposit today in savings account

How much would you have to deposit today in a savings account that pays 4% interest compounded daily if you wanted to have $10,000 in six months?

  Determine the additional funds needed

Determine the additional funds needed. Round your answer to the nearest dollar. Total assets $ AFN $ What is the resulting total forecasted amount of notes payable? Round your answer to the nearest dollar.

  Buy call options on paccar stock

Suppose you buy call options on Paccar stock. Each option costs $3, has a strike price of $40 and an expiration date of July 1.

  The entertainment system vendor has offered to finance the

the adam limousine company wants to purchase a car entertainment system for one of its automobiles. the entertainment

  Suppose this company loses sales on other models because of

nbspconfederation electronics is ad mid-sized electronic s manufacturer located in markham ontario. the company

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