Question
Consider the following project for Dawg Incorporated: YEAR 0 1 2 3 4 5 Sales $150,000 $150,000 $150,000 $150,000 $150,000 Cost of Goods $70,000 $70,000
Consider the following project for Dawg Incorporated:
| YEAR | 0 | 1 | 2 | 3 | 4 | 5 |
| Sales |
| $150,000 | $150,000 | $150,000 | $150,000 | $150,000 |
| Cost of Goods |
| $70,000 | $70,000 | $70,000 | $70,000 | $70,000 |
| S&A |
| $30,000 | $30,000 | $30,000 | $30,000 | $30,000 |
| Depreciation |
| $30,000 | $30,000 | $30,000 | $30,000 | $30,000 |
| Investment in NWC | $1,000 | $500 | $500 | $500 | $500 | $500 |
| Investment in Gross PPE | $150,000 |
|
|
|
|
|
The project will last 5 years and has the same risk as the typical Dawg Incorporated project. The firm has a capital structure of 40.00% debt and 60.00% equity. The cost of debt is 8.00%, while the cost of equity is estimated at 15.00%. The tax rate facing the firm is 30.00%. There is no reclaimed NWC or NSV at end of year 5.
What is the NPV for the project?
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
The Complete Guide To Real Estate Finance For Investment Properties
Authors: Steve Berges
1st Edition
0471647128, 978-0471647126
