Global Line Inc., is considering a new 4-year expansion project that requires an initial fixed asset investment of $800,000. The fixed asset will be depreciated straight-line to zero over its 4-year life, after which time it will have a market value of $100,000 (before taxes).The project requires an initial investment in net working capital of $45,000. The project is estimated to generate $724,000 in annual sales, with costs of $480,000. The tax rate is40percent and the required return on the project is 14percent. What is the NPV of this project? Should we accept this project?
Global Line Inc., is considering a new 4-year expansion project that requires an initial fixed asset investment of $800,000. The fixed asset will be depreciated straight-line to zero over its 4-year life, after which time it will have a market value of $100,000 (before taxes).The project requires an initial investment in net working capital of $45,000. The project is estimated to generate $724,000 in annual sales, with costs of $480,000. The tax rate is40percent and the required return on the project is 14percent. What is the NPV of this project? Should we accept this project?
Related questions
Summer Tyme, Inc., is considering a new 3-year expansion projectthat requires an initial fixed asset investment of $1.62 million.The fixed asset will be depreciated straight-line to zero over its3-year tax life, after which time it will be sold for $126,000. Theproject requires an initial investment in net working capital of$180,000, all of which is recovered at the end of the project. Theproject is estimated to generate $1,440,000 in annual sales, withcosts of $576,000. The tax rate is 33 percent and the requiredreturn on the project is 11 percent.
| What is the project's year 0 net cash flow?HINT: This will not include OCF
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| Summer Tyme, Inc., isconsidering a new 4-year expansion project that requires an initialfixed asset investment of $3.024 million. The fixed asset will bedepreciated straight-line to zero over its 4-year tax life, afterwhich time it will be worthless. The project is estimated togenerate $2,688,000 in annual sales, with costs of $1,075,200. |
| Required: |
| If the tax rate is 31 percent,what is the OCF for this project? |
$591,192
$1,347,192
$1,612,800
$1,279,832
$1,414,552
