Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Margareth's Gaming Company is considering a project which will require the purchase of $1.6 million in new equipment. The equipment belongs in a 20% CCA

Margareth's Gaming Company is considering a project which will require the purchase of $1.6 million in new equipment. The equipment belongs in a 20% CCA class. Margareth's Gaming Company expects to sell the equipment at the end of the project for 15% of its original cost. Annual sales from this project are estimated at $1.2 million. Net working capital equal to $100,000 will be required to support the project. All of the net working capital will be recouped at the end of the project. The firm desires a minimal 14% rate of return on this project. The tax rate is 34%. The project span is three years, and the annual costs are 20% of the sales. (Answers should be rounded to the dollar; dont need to present the cents.)

a. Find the PV of CCA Tax Shield.

b. Find the PV of OCF.

c. What is the NPV for this project?

d. What is the IRR for this project?

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

Cases In Financial Reporting

Authors: Ellen Engel, D. Eric Hirst, Mary Lea McAnally

8th Edition

1618531220, 9781618531223

More Books

Students also viewed these Finance questions