Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

then fill the number on year 3 4 5 6 based in this question's figure on these form(clean the number on it) and also need

image text in transcribed
image text in transcribed
then fill the number on year 3 4 5 6 based in this question's figure on these form(clean the number on it) and also need npv
image text in transcribed
After spending $9,500 on client-development, you have just been offered a big production contract by a new client. The contract will add $202,000 to your revenues for each of the next five years and it will cost you $105,000 per year to make the additional product. You will have to use some existing equipment and buy new equipmont as well. The existing equipment is fully depreciated, but could be sold for $55,000 now. If you use it in the project, it will be worthless at the end of the project You will buy new equipment valued at $34,000 and use the 5-year MACRS schedule to depreciate it. It will be worthless at the end of the project. Your current production manaper eams $78,000 per year, Since she is busy with ongoing projects, you are planning to hire an assistant at $42,000 per year to help with the expansion. You will have to immediately increase your inventory from $20,000 to $30,000. It will retum to $20,000 at the end of the project Your company's tax rate is 21% and your discount rate is 14.8\%. What is the NPV of the contract? (Note: Assume that the equipment is put into use in year 1 .) Calculate the free cash flows below for years 0 through 2: (Round to the nearest dollar.) - Annual Cost - Depreciation EBIT - Tax Incremental Earnings + Depreciation - Incremental Working Capital - Opportunity Cost - Capital Investment Incremental Free Cash Flow $ $ $ The NPV of the project is: NPV=t=0n(1+r)tFCFtNPV=$92.240+(1+0.17)$51,366+(1+0.17)2$52,324+(1+0.17)3$51,302+(1+0.17)4$50,689+(1+0.17)5$60,689+(1+0.17)6$460=$76,828

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

Capital Flows And Foreign Direct Investments In Emerging Markets

Authors: S. MotamenSamadian

1st Edition

1403991545,0230597963

More Books

Students also viewed these Finance questions