Foxglove Corp. is faced with an investment project. The following information is

Question

Foxglove Corp. is faced with an investment project. The following information is associated with this project: * Assume no interest expenses and a zero tax rate. The project involves an initial investment of $100,000 in equipment that falls in the 3-year MACRS class and has an estimated salvage value of $15,000. In addition, the company expects an initial increase in net operating working capital of $5,000 which will be recovered in year 4. The cost of capital for the project is 12 percent. What is the project's net present value? Helena Furnishings wants to sharply reduce its cash conversion cycle. Explain what effect each of the following measures would have on the CCC, and why.. The company increases its average inventory without increasing its sales. The company reduces its DSO (also called Average Collection Period). The company starts paying its payables sooner. Statements a and b are correct: All of the statements above are correct. ccc = ICP + RCP + PDP = days inventory/saves/365 + average a/R/saves/365 - average a/p/ /365 When the company names is average inventory without increasing its sales days inventory will go up coming ICP to up while RCP PDP constant the ccc to increasing When the company reduces its DSU which will result in average to go down coming the RCP to go down which will result in to When the company status paying its payable the average account will go down discount the PDP which will result in ccc to increase

Explanation / Answer

Calculation of NetPresent Value(NPV) Year Net income Depreciation Other cashflow Total cashflows PV factor@ 12% Present Value i ii iii iv = i+ii+iii v vi = iv * v 0 0 -(100000+5000) = -105000 -105000 1 $    (105,000) 1 50000 33000 83000 0.893 $       74,107 2 60000 45000 105000 0.797 $       83,705 3 70000 15000 85000 0.712 $       60,501 4 60000 7000 15000+5000 = 20000 87000 0.636 $       55,290 NPV $     168,604

Related Questions

Navigate

• Browse (All)
• Browse F
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.