A wind turbine company is thinking of developing a new turbine, the XP9. The company estimates...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
A wind turbine company is thinking of developing a new turbine, the XP9. The company estimates that creating the XP9 will require an initial investment of $125,000 today, $250,000 of engineering related costs at the end of the first year, and $49,000 of marketing costs at the end of the second year in order to be successful. However, the company estimates that sales will be increased in years 3 through 10 by $75,000 each year. The company's current cost of capital is 15 percent. a. What is the net present value of the XP9? b. What is the net present value if sales are only increased by $50,000 in years 3 through 10? c. Using the $75,000 estimate of the increase in sales, how does the net present value calculated in part a change if the cost of capital is increased to 18 percent? A wind turbine company is thinking of developing a new turbine, the XP9. The company estimates that creating the XP9 will require an initial investment of $125,000 today, $250,000 of engineering related costs at the end of the first year, and $49,000 of marketing costs at the end of the second year in order to be successful. However, the company estimates that sales will be increased in years 3 through 10 by $75,000 each year. The company's current cost of capital is 15 percent. a. What is the net present value of the XP9? b. What is the net present value if sales are only increased by $50,000 in years 3 through 10? c. Using the $75,000 estimate of the increase in sales, how does the net present value calculated in part a change if the cost of capital is increased to 18 percent?
Expert Answer:
Answer rating: 100% (QA)
a NPV of XP9 with 75k annual sales increase Cash Flows In... View the full answer
Related Book For
Valuation The Art and Science of Corporate Investment Decisions
ISBN: 978-0133479522
3rd edition
Authors: Sheridan Titman, John D. Martin
Posted Date:
Students also viewed these finance questions
-
Question 2 Performance related pay (PRP) links pay to performance and it acts as a motivator in the form of monetary rewards and by recognising achievements. By using relevant organisational case...
-
Hyten Corporation On June 5, 1998, a meeting was held at Hyten Corporation, between Bill Knapp, Director of Marketing/Sales, and John Rich, director of engineering. The purpose of the meeting was to...
-
26. With its current leverage, Impi Corporation will have net income next year of 4.5 million. If Impis corporate tax rate is 35% and pay 8% interest on its debt, how much additional debt can Impi...
-
Let v = (2, 5) and w = (3, 2). Find the length of v + w.
-
a) Calculate the heat flux through a sheet of brass 7.5 mm (0.30 in.) thick if the temperatures at the two faces are 150C and 50C (302F and 122F); assume steady-state heat flow. (b) What is the heat...
-
Trucks using a single-server loading dock have a mean arrival rate of 14 per day. The loading/unloading rate is 19 per day. a. What is the probability that the truck dock will be idle? b. What is the...
-
When costs are rising, what effect does LIFO have on a balance sheet compared to FIFO?
-
The Sea Wharf Restaurant would like to determine the best way to allocate a monthly advertising budget of $1000 between newspaper advertising and radio advertising. Management decided that at least...
-
60 6.4.7 Exercises Evaluate the following integrals: 1. 1 (1-3) 6+x da 2x+1 2. dx x(x+8)
-
Table 3.1 in the previous chapter presents financial statements for R&E Supplies for the period 2018 through 2021, and Table 3.5 presents a pro forma financial forecast for 2022. Use the information...
-
I'm the manager of 3 VIP helicopters, with reliability 19%, 46% and 41% respectively. What is the probability that AT LEAST ONE of the helicopters is functioning? Round to the nearest percentage...
-
In 2017, Eraser Corp had Revenue of $229 million, Cost of Goods Sold of $117 million (this includes Depreciation of $46 million), Sales General and Admin Expenses of $33 million, and faced a tax rate...
-
d The function, p(d)=1+ gives the pressure, in atmospheres (atm), at a depth d in the sea (d 33 is in feet). Note that p(0)=1 atm, p(33)=2, and so on. Find the pressure at 60 feet. The pressure at 60...
-
what are the " Data Types" in the relational model ? List the differences between "Domain and TYPE". (answer in 500 words atleast)
-
Identify cultural issues between firms, the public, and employees. Reaffirm the role of values and ethics in decision making and leadership. Confirm accountability and determine which people and...
-
Let x=(-11,-15). Find a vector, n, in the opposite direction of x such that ||n|| = 7. Enter your answer in exact form. Provide your answer below:
-
Classifying Costs The following is a list of costs that were incurred in the production and sale of large commercial airplanes: Classify each cost as either a product cost or a period cost. Indicate...
-
Record the following selected transactions for March in a two-column journal, identifying each entry by letter: (a) Received $10,000 from Shirley Knowles, owner. (b) Purchased equipment for $35,000,...
-
J& B Drilling Company has recently acquired a lease to drill for natural gas in a remote region of southwest Louisiana and southeast area has long been known for oil and gas production, and the...
-
Answer the following questions for Canton Corporation, which was described in Problem 9-4. Assume that firm revenues grow at a rate of 10% per year during years 1 through 4 before leveling out at no...
-
The Owner of Big Boy Flea Market (BBFM), Lewis Redding, passed away on December 30, 2014. His 100% ownership interest in BBFM became part of his estate, on which his heirs must pay estate taxes. The...
-
The production budget for cars for May (in units) is a. 6,500 b. 11,000 c. 4,500 d. 10,100
-
The total cost of goods sold for June is a. $103,500 b. $128,800 c. 57,500 d. \($232,300\) Munch Enterprises makes a small toy car that is voice activated. Projected sales for the next four months...
-
What is Munchs expected profit for April? a. $192,500 b. $56,000 c. $66,000 d. $59,000
Study smarter with the SolutionInn App