Got Homework?
Connect with other students for help. It's a free community.
Here's the question you clicked on:
 0 viewing
Wheel Industries is considering a threeyear expansion project.
The project requires an initial investment of $1.5 million. The project will use straightline depreciation method. The project has no salvage value. It is estimated that the project will generate additional revenues of $1.2 million per year and has annual costs of $600,000.
The tax rate is 35 percent. Calculate the cash flows for the project. If the discount rate were 6 percent, calculate the NPV of the project, then offer your thoughts as to whether this is an economically acceptable project to undertake.
Clinton Co. has jus
 one year ago
 one year ago
Wheel Industries is considering a threeyear expansion project. The project requires an initial investment of $1.5 million. The project will use straightline depreciation method. The project has no salvage value. It is estimated that the project will generate additional revenues of $1.2 million per year and has annual costs of $600,000. The tax rate is 35 percent. Calculate the cash flows for the project. If the discount rate were 6 percent, calculate the NPV of the project, then offer your thoughts as to whether this is an economically acceptable project to undertake. Clinton Co. has jus
 one year ago
 one year ago

This Question is Closed

killerapp7Best ResponseYou've already chosen the best response.0
After tax cash flow per year = (1,200,000  600,000) * (10.35) = 390,000 Value of the project = (390,000) / 0.06 = $6,500,000 NPV = 6,500,000  1,500,000 = $5,000,000
 one year ago

fresh88Best ResponseYou've already chosen the best response.0
The npv would be 390/1.06 + 390/1.06^2 + 390/1.06^3
 one year ago
See more questions >>>
Your question is ready. Sign up for free to start getting answers.
spraguer
(Moderator)
5
→ View Detailed Profile
is replying to Can someone tell me what button the professor is hitting...
23
 Teamwork 19 Teammate
 Problem Solving 19 Hero
 Engagement 19 Mad Hatter
 You have blocked this person.
 ✔ You're a fan Checking fan status...
Thanks for being so helpful in mathematics. If you are getting quality help, make sure you spread the word about OpenStudy.