Calculate the net present value, Financial Management

Assignment Help:

Tri-City Industries is considering two possible capital projects. Project A requires an initial investment of $240,000 and provides cash flows before tax of $120,000 in year one, $140,000 in year two, and $160,000 in year three. If project A is accepted, project B may be undertaken. It provides cash flows before tax of $140,000 for each of three years. However, projects A and B are partial substitutes, and the cash flows of project A will decrease by $40,000 in each of the three years if project B is also undertaken. The company's weighted average cost of capital is 13% and its tax rate is 35%. Ignore the impact of depreciation for this question.

a.  What is the NPV of doing only project A?

b.  What is the maximum amount that project B can cost so that the combination of taking both projects provides the same benefit of investing only in project A?


Related Discussions:- Calculate the net present value

List the benefits of the flexible exchange rate regime, List the benefits o...

List the benefits of the flexible exchange rate regime. Answer:  The benefits of the flexible exchange rate system include: a) Automatic attainment of balance of payments eq

Cash management - managing excess cash, Cash management is about managing ...

Cash management is about managing excess cash also. The response of management must depend on whether the surplus is large and how long it is likely to exist. If the balance is

Relationship between financial decision making and risk , Discuss the relat...

Discuss the relationship between financial decision making and risk and return. Would all financial managers view risk-return tradeoffs similarly

CAPM, Techiniques of capm Effects of capm

Techiniques of capm Effects of capm

Discuss risk from perspective of capital asset pricing model, Discuss risk ...

Discuss risk from the perspective of the Capital Asset Pricing Model (CAPM). The Capital Asset Pricing Model or CAPM be able to be used to compute the appropriate required rate

Objectives of cash management, Q. Objectives of Cash Management? (i) To...

Q. Objectives of Cash Management? (i) To sustain Optimum Cash Balance: - The major objective of cash management is to determine the optimum cash balance required in the busines

Short-term volatility position, (a) The position of an agency that sells a ...

(a) The position of an agency that sells a callable coupon bond. We supposed that coupon bond has a maturity of 3 years and is callable only at the second year. (b) The market t

Macaulay duration and modified duration, We can also express Modified...

We can also express Modified duration as follows:                                                                                               ...Eq. (3) The

Explain the currency trading at a discount, What is meant by a currency tra...

What is meant by a currency trading at a discount or at a premium in the forward market? Answer:  The forward market includes contracting today for the future purchase or sale o

Write Your Message!

Captcha
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