What volume of sales would the npv just break even

Assignment Help Financial Management

Reference no: EM131834992

PCs Forever is a company that produces personal computers. It has been in operation for two years and is at capacity. It is considering an investment project to expand its production capacity. The project requires an initial outlay o:f $1,000,000: $800,000 for new equipment with an expected life of four years and $200,000 for additional working capital. The selling price of its PCs is $1,200 per unit, and annual sales are expected to increase by 1,000 units as a result of the proposed expansion. Annual fixed costs excluding depreciation of the new equipment will increase by $100,000, and variable costs are $800 per unit. The new equipment will be depreciated over four years using the straight-line method with a zero salvage value. The hurdle rate for the project is 12% per year, and the company pays income tax at the rate of 40%

a. What is the project's NPV'?

b. What is the IRR of the project? Shall the project be accepted or rejected?

c. At what volume of sales would the NPV just break even?

Please answer this question by using EXCEL and show the EXCEL step.

Reference no: EM131834992

Questions Cloud

What should be the annual stated rate : What should be the annual stated rate that SLB should offer its depositors?

What is the forecast change in net operating working capital : Assuming that actually occurs, what is the forecast change in the net operating working capital.

What should be additional annual investments : What should be additional annual investments John has to make in order to accumulate the necessary saving for retirement?

Should the firm borrow the money to take the discount : Should the firm borrow with the 20 percent compensating balance requirement? Should the firm borrow the money to take the discount?

What volume of sales would the npv just break even : PCs Forever is a company that produces personal computers. At what volume of sales would the NPV just break even?

What does credit have to do with economic expansion : What is credit? What does credit have to do with economic expansion? If credit stops or slows, how does this affect “the business of business?

What is the one year forward rate expected on treasury bills : Assume the current interest rate on a 1-year Treasury bond (1R1) is 6.00 percent, what is the 1-year forward rate expected on Treasury bills during year 3, 3f1?

How much of his first payment will be applied to interest : Your uncle borrows $57,000 from the bank at 11 percent interest over the nine-year life of the loan. How much of his first payment will be applied to interest?

How much will you have to deposit today : You need $90,000 in 10 years. Required: If you can earn .57 percent per month, how much will you have to deposit today?

User Account

All Pages