Unit 3 Witten Assignment.pf-Adobe Acrobat Reades DC View Window Help lools Learn

Question

Unit 3 Witten Assignment.pf-Adobe Acrobat Reades DC View Window Help lools Learning Guide Uni.. Learning Guide Uni manufacture a very unique case for smart phones The case is very drabke, attractive and is vualy a modeds of smart phone litwill also have the k go of your cient, apronnent, local ury plan d tobe grven away at pxthc relatio events by your dort As we know from prior cases involving this company, more and more details ol the peopect bec apparent and with more precihsion and certainty The lollowing are the final values to the data that you have been estimating up to this pint · You can borrow funds from your bank at 3% e The cost to install the needed equipment will be $ 105,000 and this cost is incumed prior to any cash s received by the project The gross revenues from the project will be $25,000 for year 1, then $27,000 for years 2 and 3 Y will be $28,000 and year 5 (the last year of the project) will be $23,000 expected annual cash outflows (curment project costs) are estimated at being $13,000 fow the test year, then $12,000 for years 2, 3, and 4 The final year costs will be $10.000 Your tax rate equipment After 5 30% and you plan * to depreciate the equipment on a straight-äine basis for the e of the years the equipment will stop working and will have a residual (salvage) value of $5.000 * The discount rate you are assuring-now 7% Requirements of the paper: O Type here to search Treat others As yoa want to be

Explanation / Answer

Soln: We are considering here the NPV , So need to get the cash inflows and outflows, please refer the table below:

This business business opportunity should not be pursued as final NPV is negative and we have not included the borrowing cost in the calculation.

Year 0 1 2 3 4 5 Salvage value Initial cost -105000 Cash outflows 13000 12000 12000 12000 10000 Cash inflows 25000 27000 27000 28000 23000 Depreciation -21000 -21000 -21000 -21000 -21000 5000 Cash flows from operations -9000 -6000 -6000 -5000 -8000 Taxes 0 0 0 0 0 Net cash inflows -9000 -6000 -6000 -5000 -8000 Add back the depreciation 12000 15000 15000 16000 13000 rate 1.07 1.07 1.07 1.07 1.07 1.07 1.07 PV -105000 11214.95 13101.58 12244.47 12206.32 9268.82 3564.931 NPV -43398.9

Related Questions

Navigate

• Browse (All)
• Browse U
• Subjects

---

---

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