Xyz corporation is considering an expansion project

Assignment Help Finance Basics

Reference no: EM13852199

Cash Flow Estimation Salvage Value:

XYZ Corporation is considering an expansion project. To date they have spent $51,400 investigating the viability of the project and have decided to proceed. The CEO of XYZ spent $22,100 last year on his business trip to New York where he discussed about the proposed new project with the board members. The company spent $55,000 on a marketing study before its current analysis regarding whether to accept or reject the project. The proposed project will cost $990,000.00. It will also cost additional $14,600.00 for shipping and installation. The project will be depreciated over a 3 year MACRS class life. XYX would use the 3-year MACRS method to depreciate the machine and equipment which are 33.33%, 44.45%, 14.81%, and 7.41%.

If the project is undertaken the company will need to increase its inventories by $44,100, and its accounts payable will rise by $11,300. The company will realize an additional $874,450.00 in sales over each of the next three years. The company's operating costs (not including depreciation) will increase by $404,702.00 a year. Both sales and the operating cost are expected to grow 4.45% annually during the life of the project. The company's tax rate is 31.00%. At t = 3, the project's economic life is complete, but it will have a salvage value (before-tax) of $97,500.00 after three years. The project's WACC is 9.25%. What is the project's net present value (NPV)?

Reference no: EM13852199

Questions Cloud

What are supply shocks : What are supply shocks? Explain what effect adverse and favorable supply shocks have on the supply curve. Give an example of a supply shock that has affected the U.S. economy on more than one occasion

About the encryption and decryption : Encryption and decryption Fill in the missing code in the main function of the provided skeleton code

Determine tension in the rope : Assume that the masses of the chains, pulleys, and ropes are negligible. Determine the tension in the rope when the crate is being lifted with constant speed.

Important to the management of business projects : Briefly explain why the topic you are discussing is important to the management of business projects - what type of audience is the paper is directed: a novice, a senior manager who knows nothing about projects management, a PM practitioner

Xyz corporation is considering an expansion project : XYZ Corporation is considering an expansion project. To date they have spent $51,400 investigating the viability of the project and have decided to proceed. The CEO of XYZ spent $22,100 last year on his business trip to New York where he discussed ab..

Coefficient of static friction : What is Moe's horizontal displacement from his original location? What is Moe's speed when he hits the ground? What is the minimum possible value for Curley's coefficient of static friction if he does not move?

How do you analyse a firm''s dividend policy : 1) How do you analyse a firm's dividend policy based on increasing eps and dps? (If both eps and dps are increasing. )2) Which is a better way of financing a company's investment? Borrow money , issue bonds or reducing dividend payout? Could you give..

Analyze the organization human resource management programs : Choose an organization with which you are familiar or one in which you have an interest. Research and analyze the organization's Human Resource Management programs, policies, procedures, or initiatives

Made of a material twice : Two solid metal balls are placed in contact with each other. The first ball is made of a material twice as dense as the second ball; the first ball has a radius of 1, the second has a radius of 3. The gravitational force between them is F1.

User Account

All Pages