A firm has projected the following financials for a possible project:YEARSalesCost of GoodsS&ADepreciationInvestment in NWCInvestment in Gross PPE01,163.00104,285.001125,285.0062,893.0030,000.0020,857.00526.002125,285.00 125,285.00362,893.00 62,893.00 62,893.0030,000.00 30,000.0020,857.00 20,857.00526.00What is the NPV of the project? (Hint: Be careful about rounding the WACC here!)526.00125,285.00 125,285.0030,000.0020,857.005526.0062,893.0030,000.0020,857.00526.00The firm has a capital structure of 46.00% debt and 54.00% equity. The cost of debt is 10.00%, while the cost of equityis estimated at 13.00%. The tax rate facing the firm is 38.00%. (Assume that you can't recover the final NWC position inyear 5. i.e. only consider the change in NWC for each year)

Net present is the difference between the present value of all cash inflows and initial investment…

YEAR Sales Cost of Goods S&A Depreciation Investment in NWC nvestment in Gross PPE 0 1,163.00 104,285.00 1 125,285.00 2 526.00 3 125,285.00 125,285.00 125,285.00 526.00 4 62,893.00 62,893.00 62,893.00 62,893.00 30,000.00 30,000.00 30,000.00 20,857.00 20,857.00 20,857.00 20,857.00 20,857.00 526.00 30,000.00 5 526.00 125,285.00 62,893.00 30,000.00 526.00

YEAR Sales Cost of Goods S&A Depreciation Investment in NWC nvestment in Gross PPE 0 1,163.00 104,285.00 1 125,285.00 2 526.00 3 125,285.00 125,285.00 125,285.00 526.00 4 62,893.00 62,893.00 62,893.00 62,893.00 30,000.00 30,000.00 30,000.00 20,857.00 20,857.00 20,857.00 20,857.00 20,857.00 526.00 30,000.00 5 526.00 125,285.00 62,893.00 30,000.00 526.00

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter12: Capital Investment Analysis

Section: Chapter Questions

Problem 1CMA

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A firm has projected the following financials for a possible project: YEAR Sales Cost of Goods S&A Depreciation Investment in NWC Investment in Gross PPE 0 1,163.00 104,285.00 1 125,285.00 2 62,893.00 62,893.00 20,857.00 125,285.00 30,000.00 30,000.00 526.00 526.00 3 125,285.00 4 125,285.00 30,000.00 30,000.00 20,857.00 20,857.00 20,857.00 What is the NPV of the project? (Hint: Be careful about rounding the WACC here!) 62,893.00 62,893.00 62,893.00 526.00 5 526.00 125,285.00 30,000.00 20,857.00 526.00 The firm has a capital structure of 46.00% debt and 54.00% equity. The cost of debt is 10.00%, while the cost of equity is estimated at 13.00%. The tax rate facing the firm is 38.00%. (Assume that you can't recover the final NWC position in year 5. i.e. only consider the change in NWC for each year)
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