Boeing is looking to introduce a new jet, the 797, set to be available for purchase in 5 years. Accounting for all of the uncertainty in the aviation market they have come up with some estimated yearly revenues, displayed in the model below starting when it is purchased. This project will require a $200 million initial investment and profits will not begin until the plane is available for purchase. What is the NPV of this project, and should Boeing build this jet if they have a cost of capital of 14% and the life of the project is 20 years?                                                                                                                                                                  Annual Revenue Probability         $95,000,000 65%         $80,000,000 20%         $65,000,000 12%         $45,000,000 3%

FastCars is debating whether its next car model should be a gas or electric car. Due to factorylimitations, FastCars will only be able to introduce one new model in the next five years• Both models would have a five-year lifecycle, before they would need to be completelyredesigned. Thus FastCars will evaluate the project with a five-year time horizon• The gas model would have the following projected sales and cost of goods sold (in millions):Year 1 2 3 4 5Sales 14 17 19 19 15COGS 10 10 12 10 5   • The electric model would have the following projected sales and cost of goods sold (in millions):Year 1 2 3 4 5Sales 5 10 25 30 30COGS 4 7 15 15 12• Initial capital expenditures for retooling the factory will be 10 million dollars for the gas modeland 20 million dollars for the electric model. This cost will be depreciated fully using the straightline depreciation method over five years• A feasibility study was conducted that cost 1 million dollars and has already been paid for• The company’s…

U.S. Steel is considering a plant expansion to produce austenitic, precipitation hardened, duplex, and martensitic stainless steel round bars that is expected to cost $17 million now and another $10 million 1 year from now. If total operating costs will be $1.4 million per year starting 1 year from now, and the estimated salvage value of the plant is virtually zero, how much must the company make annually in years 1 through 11 to recover its investment plus a return of 23% per year? The company must make S million annually in years 1 through 11 to recover its investment plus a return of 23% per year.

Atlantic Manufacturing is considering a new investment project that will last for four years. The delivered and installed cost of the machine needed for the project is $23,957 and it will be depreciated according to the three-year MACRS schedule. The project also requires an initial increase in net working capital of $300. Financial projections for sales and costs are in the table below. In addition, since sales are expected to fluctuate, NWC requirements will also fluctuate. The end-of- year NWC requirements are included below (hint: these NWC capital requirements DO NOT represent the change in NWC for the period). The $0 requirement for NWC at the end of year 4 means that all NWC is recovered by the end of the project. The corporate tax rate is 35% and the required return on the project is 12%. Year 1 2 3 4 Sales $11,653 $12,746 $13,973 $10,638 Costs 2,322 2,536 3,456 1,434 NWC 324 352 231 0 Requirements What is the project's NPV? (Round answer to O decimal places. Do not round…

YOU ARE A FINANCIAL ANALYST FOR A COMPANY THAT IS CONSIDERING A NEW PROJECT. IF THE PROJECT IS ACCEPTED, IT WILL USE A FRACTION OF A STORAGE FACILITY THAT THE COMPANY ALREADY OWNS BUT CURRENTLY DOES NOT USE. THE PROJECT IS EXPECTED TO LAST 10 YEARS, AND THE ANNUAL DISCOUNT RATE IS 10% (COMPOUNDED ANNUALLY). YOU RESEARCH THE POSSIBILITIES, AND FIND THAT THE ENTIRE STORAGE FACILITY CAN BE SOLD FOR €100,000 AND A SMALLER (BUT BIG ENOUGH) FACILITY CAN BE ACQUIRED FOR €40,000. THE BOOK VALUE OF THE EXISTING FACILITY IS €60,000, AND BOTH THE EXISITING AND THE NEW FACILITIES (IF IT IS ACQUIRED) WOULD BE DEPRECIATED STRAIGHT LINE OVER 10 YEARS (DOWN TO A ZERO BOOK VALUE). THE CORPORATE TAX RATE IS 40%. DISCUSS WHAT IS THE OPPORTUNITY COST OF USING THE EXISTING STORAGE CAPACITY?

Ang Electronics, Incorporated, has developed a new mesh network. If successful, the present value of the payoff (when the product is brought to market) is $33.6 million. If the mesh network fails, the present value of the payoff is $11.6 million. If the product goes directly to market, there is a 40 percent chance of success. Alternatively, the company can delay the launch by one year and spend $1.26 million to test market the mesh network. Test marketing would allow the firm to improve the product and increase the probability of success to 70 percent. The appropriate discount rate is 12 percent. Calculate the NPV of going directly to market and the NPV of test marketing before going to market. (Do not round intermediate calculations and enter your answers in dollars, not millions of dollars, rounded to the nearest whole number, e.g., 1,234,567.) Answer is complete but not entirely correct. Go to market now $ Test marketing first IS 20,400,000 22,850,000 Should the firm conduct test…

Cisco is considering the development of a wireless home networking appliance, called HomeNet. The company expects to sell 300000 units per year over the project's life at an expected wholesale price of 170. Actual production will be outsourced at a cost of 93 per unit. Additionally, the company will spend $21000 in interest expense each year towards financing the project. In year 1, the firm must increase its accounts receivable by $854000, which will return to regular levels at the end of the project. The company spent $285000 last year on software to develop the router. $101.8 million of new equipment will be purchased and then depreciated using the straight-line method over a 10-year life. They expect the market value of the equipment to depreciate at 2.8% per year. The project is expected to end in year 7. The current tax rate is 21%. Use this rate for both income tax rate and the capital gains rate. The WACC for the company is 12.4%.áWhat is the NPV of the project? $21,604,034.24…

You are the financial analyst for a tennis racket manufacturer. The company is considering using a graphitelike material in its tennis rackets. The company has estimated the information in the following table about the market for a racket with the new material. The company expects to sell the racket for 5 years. The equipment required for the project will be depreciated on a straight-line basis and has no salvage value. The required return for projects of this type is 14 percent and the company has a 24 percent tax rate. Market size Market share Selling price Variable costs per unit Fixed costs per year Initial investment Pessimistic Expected 124,000 Pessimistic Expected Optimistic $ $ $ $ $ 18% 152 99 $ 134,000 22% 157 95 $971,000 $916,000 $1,635,000 $1,485,000 -482,252.94 x 1,269,299.88 X 2,753,603.41 Optimistic Answer is complete but not entirely correct. Calculate the NPV for each case for this project. Assume a negative taxable income generates a tax credit. (A negative amount…

OpenSeas, Inc. is evaluating the purchase of a new cruise ship. The ship will cost $501 million and will operate for 20 years. OpenSeas expects annual cash flows from operating the ship to be $70.7 million and its cost of capital is 12.0%. a. Prepare an NPV profile of the purchase. b. Identify the IRR on the graph. c. Should OpenSeas go ahead with the purchase? d. How far off could OpenSeas's cost of capital estimate be before your purchase decision would change? SITTE a. Prepare an NPV profile of the purchase. To plot the NPV profile, we compute the NPV of the project for various discount rates and plot the curve. The NPV for a discount rate of 2.0% is $ million. (Round to one decimal place.)

Vijay