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

Firms operation and financing decision, Q. Firms operation and financing de...

Q. Firms operation and financing decision? Firms operation and financing decision risks or the variability of returns also results for the decision make within the company. Ris

Weighted average cost of capital , I need report on Weighted Average Cost o...

I need report on Weighted Average Cost of Capital. Do you provide help in topic Weighted Average Cost of Capital? I need expert's assistance to solve my college assignment. Please

Define the covered arbitrage process and arbitrage profit, Assume that the ...

Assume that the current spot exchange rate is FF6.25/$ and the 3 month forward exchange rate is FF6.28/$. The 3 month interest rate is 5.6% per year in the U.S. and 8.8% per year i

How to calculate correlation co-efficient, Q. How to calculate correlation ...

Q. How to calculate correlation co-efficient? The correlation co-efficient measures the nature and the extent of relationship between the stock market index return and the stoc

Explain why accounting profits and cash flows are different, Explain why ac...

Explain why accounting profits and cash flows are not the same thing. Ans: Stock value relies on future cash flows, their timing, and their riskiness.  Profit calculations do n

Explain the compound interest, What is compound interest? Compare compound ...

What is compound interest? Compare compound interest to discounting. Compound interest takes place while interest is earned on interest and on the original principal of an invest

return on equity, Lee Sun's has sales of $6,000, total assets of $5,000, a...

Lee Sun's has sales of $6,000, total assets of $5,000, and a profit margin of 10 percent. The firm has a total debt ratio of 40 percent. What is the return on equity?

Capital budegting, SCL Limited a highly profitable company is engaged in th...

SCL Limited a highly profitable company is engaged in the manufacture of power intensive products.

Define required cash and surplus cash, 1. What is a venture's present value...

1. What is a venture's present value? Does the past matter? What is meant by the statement, "If you are not using estimates, you are not doing a valuation?" 2. Define (a) requ

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