Reference no: EM13288306
Holmes Manufactuiring is considering a new machine that costs $250,000 and would reduce pretax manufacturing costs by $90,000 annually. Holmes would use the 3-year MACRS method to depreciate the machine, and management thinks the machine would have a value of $23,000 at the end of its 5-year operating life. The applicable depreciateion rates are 33%, 45% 15%, and 7% as discussed in Appendix 12A. Net operating working cpital would increase by $25,000 initially, but it would be recovered at the endo f the project's 5-year life. Holme's marginal tax rate is 40%, and a 10% WACC is appropriate for the project.
a. Calcuate the projects NPV, IRR, MIRR and payback.
b, Assume management is unsure about the $90,000 cost savings--this figure could deviate by as much as plus or minus 20%. What would the NPV be under each of these situations?
c. Suppose the CFO wants yo uto do a scenario analysis with diffeent values for the cost savings, the machine's salvage value, and the net operatin gworking capital (NOWC_ requriement. She asks you to use the following probabilities and values in the scenairo analysis:
|
What is the expected total annual variable costs
: The Grist Mill estimates it can sell 600 pairs of shoes a year, plus or minus 2 percent. It also estimates the variable cost at $31 per pair, plus or minus 3 percent. What is the expected total annual variable costs under the worst case scenario?
|
|
What is the amount of the depreciation in year 2
: The MACRS depreciation allowances on 3-year property are 33.33 percent, 44.45 percent, 14.81 percent, and 7.41 percent, respectively. What is the amount of the depreciation in year 2 for 3-year property with an initial cost of $64,000?
|
|
What is the relevant cost
: What is the relevant cost of the 720 liters of the raw material when deciding how much to bid on the special order?
|
|
Ind the magnitude of the tension of the ropes
: An oil rig in the gulf is held at its designated drilling location by 3 tugboats. tugboat A oulls with 42000 N straight in the east direction, find the magnitude of the tension of the ropes attached to tugboats B and C
|
|
What would the npv be under each of these situations
: Suppose the CFO wants yo uto do a scenario analysis with diffeent values for the cost savings, the machine's salvage value, and the net operatin gworking capital (NOWC_ requriement. She asks you to use the following probabilities and values in the..
|
|
Find a general expression for the best estimate of x
: A random signal X can be observed only in the presence of independent addictive noise N. The observed quantity is Y = X + N.The joint probability density function of X and Y is f(x,y) = K exp[-(x2 + y2 + 4xy)] all x and y
|
|
What do you predict the exchange rate will be in one year
: What do you predict the exchange rate will be in one year? In two years? In five years? What relationship are you using?
|
|
Calculate the value of the project
: A firm has decided to take a project that requires an initial investment of $2 million. If funded entirely with equity, the firm expects the project to generate net operating cash flows (after tax) during the project's twenty five year life as fol..
|
|
Explain mechanism for all steps in the addition of hbr
: Write a detailed, stepwise mechanism for all steps in the addition of HBr to 1-pentene in the presence of peroxide. Show all intermediates and use cuved arrows as appropraite.
|