You are asked to evaluate the following project for a corporation with profitable ongoing operations. The required investment on January 1 of this year is $37.000. The firm will depreciate the investment at a CCA rate of 20 percent. The firm is in the 40 percent tax bracket. The price of the product on January 1 will be $102 per unit. That price will stay constant in real terms Labour costs will be $18.20 per hour on January 1. They will increase at 15 percent per year in real terms. Energy costs will be $8.70 per physical unit on January 1 they will increase at 25 percent per year in real terms. The inflation rate is 3.4 percent. Revenue is received and costs are paid at year- end: Year 1 Year 2 Year 3 Year 4 230 Physical production, in units Labour input, in hours Energy input, physical units 230 510 1,240 180 1,240 1,240 1,240 180 180 The risk-free nominal discount rate is 8.3 percent. The real discount rate for costs and revenues is 5.3 percent. Calculate the NPV of this project (Do not round intermediote calculations. Round the answer to 2 decimal places. Negative amount should be indicated by e minus sign. Omit S sign in your response.) Net present value

You are asked to evaluate the following project for a corporation with profitable ongoing operations. The required investment on January 1 of this year is $37.000. The firm will depreciate the investment at a CCA rate of 20 percent. The firm is in the 40 percent tax bracket. The price of the product on January 1 will be $102 per unit. That price will stay constant in real terms Labour costs will be $18.20 per hour on January 1. They will increase at 15 percent per year in real terms. Energy costs will be $8.70 per physical unit on January 1 they will increase at 25 percent per year in real terms. The inflation rate is 3.4 percent. Revenue is received and costs are paid at year- end: Year 1 Year 2 Year 3 Year 4 230 Physical production, in units Labour input, in hours Energy input, physical units 230 510 1,240 180 1,240 1,240 1,240 180 180 The risk-free nominal discount rate is 8.3 percent. The real discount rate for costs and revenues is 5.3 percent. Calculate the NPV of this project (Do not round intermediote calculations. Round the answer to 2 decimal places. Negative amount should be indicated by e minus sign. Omit S sign in your response.) Net present value

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter19: Lease And Intermediate-term Financing

Section: Chapter Questions

Problem 8P

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