The following table presents sales forecasts for Golden Gelt Giftware. The unit price is $40. The unit cost of the giftware is $25. Year 1 2 3 4 Thereafter Unit Sales 22,000 30,000 14,000 5,000 0 It is expected that net working capital will amount to 20% of sales in the following year. For example, the store will need an initial (Year O) investment in working capital of 0.20 x 22,000 x $40 = $176,000. Plant and equipment necessary to establish the giftware business will require an additional investment of $200,000. This investment will be depreciated straight-line over 3 years. The firm's tax rate is 30%. The discount rate is 20%. a. What is the net present value of the project? Note: Do not round intermediate calculations. Round your answer to the nearest whole dollar amount. b. By how much does NPV increase if the firm takes immediate 100% bonus depreciation? a. Net present value b. Increase in NPV $ 284,622

The following table presents sales forecasts for Golden Gelt Giftware. The unit price is $40. The unit cost of the giftware is $25. Year 1 2 3 4 Thereafter Unit Sales 22,000 30,000 14,000 5,000 0 It is expected that net working capital will amount to 20% of sales in the following year. For example, the store will need an initial (Year O) investment in working capital of 0.20 x 22,000 x $40 = $176,000. Plant and equipment necessary to establish the giftware business will require an additional investment of $200,000. This investment will be depreciated straight-line over 3 years. The firm's tax rate is 30%. The discount rate is 20%. a. What is the net present value of the project? Note: Do not round intermediate calculations. Round your answer to the nearest whole dollar amount. b. By how much does NPV increase if the firm takes immediate 100% bonus depreciation? a. Net present value b. Increase in NPV $ 284,622

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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The following table presents sales forecasts for Golden Gelt Giftware. The unit price is $40. The unit cost of the giftware is $25. Year Unit Sales 1 22,000 2 30,000 3 14,000 4 5,000 Thereafter 0 It is expected that net working capital will amount to 20% of sales in the following year. For example, the store will need an initial (Year 0) investment in working capital of 0.20 × 22,000 × $40 = $176,000. Plant and equipment necessary to establish the giftware business will require an additional investment of $200,000. This investment will be depreciated using MACRS and a 3-year life. After 4 years, the equipment will have an economic and book value of zero. The firm’s tax rate is 30%. The discount rate is 20%. Use the MACRS depreciation schedule. a. What is the net present value of the project? (Do not round intermediate calculations. Round your answer to the nearest whole dollar amount.)
The following table presents sales forecasts for Golden Gelt Giftware. The unit price is $40. The unit cost of the giftware is $25. Year 1 2 3 4 Thereafter Unit Sales 22,000 30,000 14,000 5,000 0 It is expected that net working capital will amount to 20% of sales in the following year. For example, the store will need an initial (Year O) investment in working capital of 0.20 × 22,000 × $40 = $176,000. Plant and equipment necessary to establish the giftware business will require an additional investment of $200,000. This investment will be depreciated straight-line over 3 years. The firm's tax rate is 30%. The discount rate is 20%. a. What is the net present value of the project? Note: Do not round intermediate calculations. Round your answer to the nearest whole dollar amount. b. By how much does NPV increase if the firm takes immediate 100% bonus depreciation? a. Net present value b. Increase in NPV $ 284,622
The following table presents sales forecasts for Golden Gelt Giftware. The unit price is $40. The unit cost of the giftware is $25. Year 1 2 3 4 Thereafter Unit Sales 22,000 30,000 14,000 5,000 8 It is expected that net working capital will amount to 20% of sales in the following year. For example, the store will need an initial (Year 0) Investment in working capital of 0.20 x 22,000 × $40 = $176,000. Plant and equipment necessary to establish the giftware business will require an additional Investment of $200,000. This Investment will be depreciated straight-line over 3 years. The firm's tax rate is 30%. The discount rate is 20%. a. What is the net present value of the project? Note: Do not round Intermediate calculations. Round your answer to the nearest whole dollar amount. b. By how much does NPV Increase if the firm takes Immediate 100% bonus depreciation? a. Net present value b. Increase in NPV
The following table presents sales forecasts for Golden Gelt Giftware. The unit price is $40. The unit cost of the giftware is $25. Year 1 2 3 4 Thereafter Unit Sales 22,000 30,000 14,000 5,000 0 It is expected that net working capital will amount to 20% of sales in the following year. For example, the store will need an initial (Year 0) investment in working capital of 0.20 x 22,000 x $40 = $176,000. Plant and equipment necessary to establish the giftware business will require an additional investment of $200,000. This investment will be depreciated straight-line over 3 years. After 4 years, the equipment will have an economic and book value of zero. The firm's tax rate is 30%. The discount rate is 20%. Use the MACRS depreciation schedule. a. What is the net present value of the project? Note: Do not round intermediate calculations. Round your answer to the nearest whole dollar amount. b. By how much does NPV increase if the firm takes immediate 100% bonus depreciation? a. Net present…
The following table presents sales forecasts for Golden Gelt Giftware. The unit price is $40. The unit cost of the giftware is $25. Year 1 2 3 4 Thereafter Unit Sales 22,000 30,000 14,000 5,000 0 It is expected that net working capital will amount to 20% of sales in the following year. For example, the store will need an initial (Year O) investment in working capital of 0.20 x 22,000 $40 = $176,000. Plant and equipment necessary to establish the giftware business will require an additional investment of $200,000. This investment will be depreciated straight-line over 3 years. After 4 years, the equipment will have an economic and book value of zero. The firm's tax rate is 30%. The discount rate is 20% . Use the MACRS depreciation schedule. a. What is the net present value of the project? Note: Do not round intermediate calculations. Round your answer to the nearest whole dollar amount. b. By how much does NPV increase if the firm takes immediate 100% bonus depreciation? a. Net present…
NPV. Miglietti Restaurants is looking at a project with the following forecasted sales: first-year sales quantity of 35,000, with an annual growth rate of 4.00% over the next ten years. The sales price per unit will start at $42.00 and will grow at 2.00% per year. The production costs are expected to be 55% of the current year's sales price. The manufacturing equipment to aid this project will have a total cost (including installation) of $2,400,000. It will be depreciated using MACRS,, and has a seven-year MACRS life classification. Fixed costs will be $360,000 per year. Miglietti Restaurants has a tax rate of 38%. What is the operating cash flow for this project over these ten years? Find the NPV of the project for Miglietti Restaurants if the manufacturing equipment can be sold for $160,000 at the end of the ten-year project and the cost of capital for this project is 8%. What is the operating cash flow for this project in year 1? (Round to the nearest dollar.) n example Get more…
NPV. Miglietti Restaurants is looking at a project with the following forecasted sales: first-year sales quantity of 34,000 , with an annual growth rate of 4.00% over the next ten years. The sales price per unit will start at $45.00 and will grow at 2.00% per year. The production costs are expected to be 55% of the current year's sales price. The manufacturing equipment to aid this project will have a total cost (including installation) of $2,400,000. It will be depreciated using MACRS, 囲, and has a seven-year MACRS life classification. Fixed costs will be $360,000 per year. Miglietti Restaurants has a tax rate of 359 /hat is the operating cash flow for this project over these ten years? Find the NPV of the project for Miglietti Restaurants if the manufacturing equipment can be sold for $140,000 at the end of the ten-year project and the cost of capital for this project is 7%. What is the operating cash flow for this project in year 1 ? (Round to the nearest dollar.) Data table MACRS…
NPV. Miglietti Restaurants is looking at a project with the following forecasted sales: first-year sales quantity of 34,000, with an annual growth rate of 4.00% over the next ten years. The sales price per unit will start at $45.00 and will grow at 2.00% per year. The production costs are expected to be 55% of the current year's sales price. The manufacturing equipment to aid this project will have a total cost (including installation) of $2,400,000. It will be depreciated using MACRS, B, and has a seven-year MACRS life classification. Fixed costs will be $360,000 per year. Miglietti Restaurants has a tax rate of 35% What is the operating cash flow for this project over these ten years? Find the NPV of the project for Miglietti Restaurants if the manufacturing equipment can be sold for $140,000 at the end of the ten-year project and the cost of capital for this project is 7%. What is the operating cash flow for this project in year 1? Data table (Round to the nearest dollar.) MACRS…
NPV. Miglietti Restaurants is looking at a project with the following forecasted sales: first-year sales quantity of 36,000, with an annual growth rate of 4.00% over the next ten years. The sales price per unit will start at $40.00 and will grow at 2.00% per year. The production costs are expected to be 55% of the current year's sales price. The manufacturing equipment to aid this project will have a total cost (including installation) of $2,100,000. It will be depreciated using MACRS, B, and has a seven-year MACRS life classification. Fixed costs will be $350,000 per year. Miglietti Restaurants has a tax rate of 40%. What is the operating cash flow for this project over these ten years? Find the NPV of the project for Miglietti Restaurants if the manufacturing equipment can be sold for $130,000 at the end of the ten-year project and the cost of capital for this project is 8%. Data table What is the operating cash flow for this project in year 1? (Round to the nearest dollar.) MACRS…
NPV. Miglietti Restaurants is looking at a project with the following forecasted sales: first-year sales quantity of 33,000, with an annual growth rate of 4.00% over the next ten years. The sales price per unit will start at $41.00 and will grow at 2.00% per year. The production costs are expected to be 55% of the current year's sales price. The manufacturing equipment to aid this project will have a total cost (including installation) of $2,100,000. It will be depreciated using MACRS, and has a seven-year MACRS life classification. Fixed costs will be $360,000 per year. Miglietti Restaurants has a tax rate of 40%. What is the operating cash flow for this project over these ten years? Find the NPV of the project for Miglietti Restaurants if the manufacturing equipment can be sold for $140,000 at the end of the ten-year project and the cost of capital for this project is 8%. MACRS Fixed Annual Expense Percentages by Recovery Class Year 3-Year…
NPV. Miglietti Restaurants is looking at a project with the following forecasted sales: first-year sales quantity of 33,000, with an annual growth rate of 4.00% over the next ten years. The sales price per unit will start at $41.00 and will grow at 2.00% per year. The production costs are expected to be 55% of the current year's sales price. The manufacturing equipment to aid this project will have a total cost (including installation) of $2,100,000. It will be depreciated using MACRS, and has a seven-year MACRS life classification. Fixed costs will be $360,000 per year. Miglietti Restaurants has a tax rate of 40%. What is the operating cash flow for this project over these ten years? Find the NPV of the project for Miglietti Restaurants if the manufacturing equipment can be sold for $140,000 at the end of the ten-year project and the cost of capital for this project is 8%. MACRS Fixed Annual Expense Percentages by Recovery Class Year 3-Year…
NPV. Miglietti Restaurants is looking at a project with the following forecasted sales: first-year sales quantity of 34,000, with an annual growth rate of 4.00% over the next ten years. The sales price per unit will start at $40.00 and will grow at 2.00% per year. The production costs are expected to be 55% of the current year's sales price. The manufacturing equipment to aid this project will have a total cost (including installation) of $2,100,000. It will be depreciated using MACRS, LOADING... , and has a seven-year MACRS life classification. Fixed costs will be $360,000 per year. Miglietti Restaurants has a tax rate of 40%. What is the operating cash flow for this project over these ten years? Find the NPV of the project for Miglietti Restaurants if the manufacturing equipment can be sold for $160,000 at the end of the ten-year project and the cost of capital for this project is 8%. MACRS Fixed Annual Expense Percentages by Recovery Class…

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