Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

for the new product line are expected to be $ 1 6 6 , 0 5 4 . 0 0 with variable costs equal to

for the new product line are expected to be $166,054.00 with variable costs equal to 50% of these sales. In addition annual fixed costs associated with this new product line are expected to be $58,655.00. The old equipment currently has no market value. The new equipment cost $79,383.00. The new equipment will be depreciated to zero using straightline depreciation for the three-year life of the project. At the end of the project the equipment is expected to have a salvage value of $36,173.00. An increase in net working capital of $52,455.00 is also required for the life of the project. The corporation has a beta of 0.809, a tax rate of 26.95%, and a target capital structure consisting of 56.01%, equity and 43.99% debt. Treasury securities have a yield of 3.47% and the expected return on the market is 8.76%. In addition, the company currently has outstanding bonds that have a yield to maturity of 7.56%.
For answers that are dollar amounts, please round to the nearest two decimal places. For answers that are a percentage, please be sure to enter your answer as a percentage (for example, .1234 becomes 12.34%).
A. What is the total initial cash outflow? (show as negative number):
B. What are the estimated annual operating cash flows? &
C. What is the terminal cash flow? $
D. What is the corporations cost of equity?
E. What is the WACC? %
F. What is the NPV for this project? $
image text in transcribed

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Green And Sustainable Finance

Authors: Simon Thompson

2nd Edition

1398609242, 978-1398609242

More Books

Students also viewed these Finance questions

Question

=+l. Withdrew $10,000 for personal use. Instructions

Answered: 1 week ago

Question

Develop a program for effectively managing diversity. page 303

Answered: 1 week ago

Question

List the common methods used in selecting human resources. page 239

Answered: 1 week ago