Answered step by step
Verified Expert Solution
Question
1 Approved Answer
46. (LO 14,2) Brigid Co. has the following potential project: Machine price =$1,800,000; additional inventory requirement =$150,000. Cash flows will be generated at year end.
46. (LO 14,2) Brigid Co. has the following potential project: Machine price =$1,800,000; additional inventory requirement =$150,000. Cash flows will be generated at year end. Rev1=$400,000 and grows at 5 percent each year for five years, while Cost1=$125,000 and grows at 4 percent. At the end of the five-year project, the assets can be sold for $200,000, while the additional inventory that was tied up will be released. The applicable CCA rate is 30 percent. The tax rate =40 percent, and RF=4.5 percent; project beta =1.25;ERM=9.5 percent. The ending UCC=$367,353. Calculate the NPV of the project if the asset class remains open upon termination of the project. Decide whether or not Brigid Co. should accept the project. (Include the half-year rule.)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started