9 . The Best Manufacturing Company is considering a new investment . Financial projections for the investment are tabulated here . The corporate tax rate is 35 percent . Assume all sales revenue is received in cash , all operating costs and income taxes are paid in cash , and all cash flows occur at the end of the year . All net working capital is recovered at the end of the project . ========================================================= FIN 571 Week 5 DQ 1
Because the weighted average is always a correct measure of a required return , why do firms not create securities to finance each project and offer them in the capital market in order to accurately determine the required return for the project ?
b-1 . What is the NPV for each project if the appropriate discount rate is 15 percent ? ( A negative answer should be indicated by a minus sign . Do not round intermediate calculations and round your answers to 2 decimal places , e . g ., 32.16 .)
b-2 . Which , if either , of these projects should be chosen if the appropriate discount rate is 15 percent ?
8 . Down Under Boomerang , Inc ., is considering a new three-year expansion project that requires an initial fixed asset investment of $ 2.82 million . The fixed asset will be depreciated straight-line to zero over its three-year tax life , after which it will be worthless . The project is estimated to generate $ 2,120,000 in annual sales , with costs of $ 815,000 . The tax rate is 30 percent and the required return is 12 percent .
What is the project ’ s NPV ? ( Do not round intermediate calculations and round your answer to 2 decimal places , e . g ., 32.16 .)
9 . The Best Manufacturing Company is considering a new investment . Financial projections for the investment are tabulated here . The corporate tax rate is 35 percent . Assume all sales revenue is received in cash , all operating costs and income taxes are paid in cash , and all cash flows occur at the end of the year . All net working capital is recovered at the end of the project . ========================================================= FIN 571 Week 5 DQ 1
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Because the weighted average is always a correct measure of a required return , why do firms not create securities to finance each project and offer them in the capital market in order to accurately determine the required return for the project ?