![callofdutyghostgamer](/avatars/49181.jpg)
callofdutyghostgamer
17.06.2020 •
Mathematics
A company is planning a four-year project, with an initial cost of $1.67 million. This investment cost is amortised to zero over four years on a straight-line basis. However, the asset could be disposed of for $435,000 in four years. The project requires $198,000 in working capital initially and is fully recoverable after the project is completed. The project generates $1,850,000 in sales and $1,038,000 in costs each year. If the tax rate is 21% and the required return rate is 16.4%, what is NPV?
Solved
Show answers
More tips
- P Photography and Videography How to Choose a Digital Camera?...
- C Computers and Internet How to Properly Order Clothing from International Online Stores...
- F Food and Cooking How to Calculate the Gender of Your Child with Blood?...
- S Society and Politics 10 Tips for Boosting Your Self-Esteem...
- C Computers and Internet How to Create a Folder on Your iPhone?...
- G Goods and services How to sew a ribbon: Tips for beginners...
- F Food and Cooking How to Make Mayonnaise at Home? Secrets of Homemade Mayonnaise...
- C Computers and Internet Which Phone is Best for Internet Surfing?...
- F Food and Cooking Everything You Need to Know About Pasta...
- C Computers and Internet How to Choose a Monitor?...
Answers on questions: Mathematics
- M Mathematics If x and y are integers greater than 1, is x a multiple of y ? (1) \small 3y^{2}+7y=x (2) \small x^{2}-x is a multiple of y. statement (1) alone is sufficient, but statement...
- M Mathematics Answer this question on the pic it s urgent...
- M Mathematics Valerie is ordering salads and drinks for her friends. Salads cost $7 each drinks cost $3 each, and there is a $5 delivery charge per order. She has $50. She buys 3...
- C Chemistry What is an example of a change in genetic traits of an organism do to human affect...
- B Biology Step 10 determine the sizes of the flocks in the second generation...
- M Mathematics 5 4 3 2 1 1 5 x -5 4 -3 -2 -14 42- 23 4 W -3 14 -5 -2.5 O-1.5 01.5 0 2.5...
Ответ:
The Net Present Value = $451180.733
Step-by-step explanation:
Given that:
the initial cost of the project is $1670000
the initial increase in working capital is $198000
The total investment will be ; initial cost of the project + initial increase in working capital
The total investment = $1670000 + $198000
The total investment = $1868000
So, This investment cost is amortised to zero over four years; This implies that the project will depreciate in four years;
Now; lets determine the rate of the annual depreciation
The annual depreciation =![\dfrac{Initial \ cost \ of \ project }{life \ of \ project}](/tpl/images/0687/7690/4bc8e.png)
The annual depreciation =![\dfrac{1670000}{4}](/tpl/images/0687/7690/6dcbe.png)
The annual depreciation = $417500
Over to the annual operating cash flow; the annual operating cash flow can be calculated as follows:
annual operating cash flow = (sales - cost) × (1 - tax rate )+ (annual depreciation × tax rate )
Given that the tax rate = 21% = 0.21
annual operating cash flow = (1850000 -1038000)×(1-0.21)+(417500× 0.21)
annual operating cash flow = 812000 × 0.79 + 87675
annual operating cash flow = 641480 + 87675
annual operating cash flow = $729155
So; let's calculate the after tax salvage value for the project
We know that the sales values for the project in four years is $435,000 (i.e the disposal rate of the asset after four years)
Thus; the book value is zero
The after tax salvage value for the project can now be determined by the relation:
after tax salvage value = sale value - tax (sale value - book value)
after tax salvage value = 435000 - 0.21 (435,000 -0)
after tax salvage value = 435000 - 91350
after tax salvage value = $343650
Similarly; given that the recovering rate of the project is $198000;
The cash flow in year 4 will be: annual operating cash flow + after tax salvage + recovery working capital
cash flow in year 4 = $(729155 + 343650 + 198000)
cash flow in year 4 = $ 1270805
This implies that the cash flow from year one to three is : 729155
the cash flow in year four is : 1270805
Given that the Required return rate = 16.4% = 0.164
We can therefore determine the Present cash inflows by using the relation:
Present Value = $(626421.8213 + 538163.0767 + 462339.413+692256.4225)
Present Value = $2319180.733
Finally, The net present value = Present Value - Total Investment
Net Present Value = $(2319180.733 - 1868000)
Net Present Value = $451180.733
Therefore; The Net Present Value = $451180.733
Ответ:
answer:
step-by-step explanation:
mjkbjhgyuft6e7y