Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Mustang Enterprises, Inc., has been considering the purchase of a new manufacturing facility for $273,000. The facility is to be fully depreciated on a straight-line

Mustang Enterprises, Inc., has been considering the purchase of a new manufacturing facility for $273,000. The facility is to be fully depreciated on a straight-line basis over seven years. It is expected to have no resale value after the seven years. Operating revenues from the facility are expected to be $108,000, in nominal terms, at the end of the first year. The revenues are expected to increase at the inflation rate of 3 percent. Production costs at the end of the first year will be $33,000, in nominal terms, and they are expected to increase at 4 percent per year. The real discount rate is 6 percent. The corporate tax rate is 38 percent.

Calculate the NPV of the project.(Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

I've calculated the NPV to be $462,441.66 and the professor has confirmed my spreadsheet is setup correctly but I LearnSmart homework page does not accept it as the right answer.

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_2

Step: 3

blur-text-image_3

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

Mergers, Acquisitions and Other Restructuring Activities

Authors: Donald DePamphilis

8th edition

9780128024539, 128013907, 978-0128013908

More Books

Students also viewed these Finance questions

Question

What is variable initialization?

Answered: 1 week ago

Question

Explain how to measure productivity.

Answered: 1 week ago

Question

Recount the methods of scheduling operations.

Answered: 1 week ago