YEAR Sales Cost of Goods S&A Depreciation Investment in NWC Investment in Gross PPE 0 1,163.00 104,285.00 2 125,285.00 125,285.00 125,285.00 62,893.00 62,893.00 3 526.00 30,000.00 30,000.00 30,000.00 30,000.00 20,857.00 20,857.00 20,857.00 526.00 62,893.00 62,893.00 125,285.00 125,285.00 526.00 5 526.00 62,893.00 30,000.00 20,857.00 20,857.00 526.00
YEAR Sales Cost of Goods S&A Depreciation Investment in NWC Investment in Gross PPE 0 1,163.00 104,285.00 2 125,285.00 125,285.00 125,285.00 62,893.00 62,893.00 3 526.00 30,000.00 30,000.00 30,000.00 30,000.00 20,857.00 20,857.00 20,857.00 526.00 62,893.00 62,893.00 125,285.00 125,285.00 526.00 5 526.00 62,893.00 30,000.00 20,857.00 20,857.00 526.00
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter12: Capital Investment Analysis
Section: Chapter Questions
Problem 1CMA
Related questions
Question
![A firm has projected the following financials for a possible project:
YEAR
Sales
Cost of Goods
S&A
Depreciation
Investment in NWC
Investment in Gross PPE
0
1,163.00
104,285.00
1
125,285.00
2
62,893.00 62,893.00
20,857.00
125,285.00
30,000.00 30,000.00
526.00
526.00
3
125,285.00
4
125,285.00
30,000.00 30,000.00
20,857.00 20,857.00 20,857.00
What is the NPV of the project? (Hint: Be careful about rounding the WACC here!)
62,893.00 62,893.00 62,893.00
526.00
5
526.00
125,285.00
30,000.00
20,857.00
526.00
The firm has a capital structure of 46.00% debt and 54.00% equity. The cost of debt is 10.00%, while the cost of equity
is estimated at 13.00%. The tax rate facing the firm is 38.00%. (Assume that you can't recover the final NWC position in
year 5. i.e. only consider the change in NWC for each year)](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F5fb98ea3-0f1d-40f9-8e20-721b66ee7bd5%2F65f71e4c-1245-4014-96b6-da5b9c567821%2F6k78gat_processed.png&w=3840&q=75)
Transcribed Image Text:A firm has projected the following financials for a possible project:
YEAR
Sales
Cost of Goods
S&A
Depreciation
Investment in NWC
Investment in Gross PPE
0
1,163.00
104,285.00
1
125,285.00
2
62,893.00 62,893.00
20,857.00
125,285.00
30,000.00 30,000.00
526.00
526.00
3
125,285.00
4
125,285.00
30,000.00 30,000.00
20,857.00 20,857.00 20,857.00
What is the NPV of the project? (Hint: Be careful about rounding the WACC here!)
62,893.00 62,893.00 62,893.00
526.00
5
526.00
125,285.00
30,000.00
20,857.00
526.00
The firm has a capital structure of 46.00% debt and 54.00% equity. The cost of debt is 10.00%, while the cost of equity
is estimated at 13.00%. The tax rate facing the firm is 38.00%. (Assume that you can't recover the final NWC position in
year 5. i.e. only consider the change in NWC for each year)
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