S & S Industries is considering an investment in a proposed project which requires an initial expenditure of $100,000 at t = 0. This expenditure can be depreciated at the following annual rates:
Year Depreciation Rate
1 20%
2 32
3 19
4 12
5 11
6 6
THe project has an economic life of six years The project's revenues are forcasted to be $90,000 a year. The project's operating costs (not including depreciation) are forecasted to be $50,000 a year. After six years the project's estimated salvage value is $10000. The company's WACC is 10%, and its corporate tax rate is 40%. What is the project's net present value (NPV)?
S & S Industries is considering an investment in a proposed project which requires an initial expenditure of $100,000 at t = 0. This expenditure can be depreciated at the following annual rates:
Year Depreciation Rate
1 20%
2 32
3 19
4 12
5 11
6 6
THe project has an economic life of six years The project's revenues are forcasted to be $90,000 a year. The project's operating costs (not including depreciation) are forecasted to be $50,000 a year. After six years the project's estimated salvage value is $10000. The company's WACC is 10%, and its corporate tax rate is 40%. What is the project's net present value (NPV)?
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New project analysis
Holmes Manufacturing is considering a new machine that costs $230,000 and would reduce pretax manufacturing costs by $90,000 annually. Holmes would use the 3-year MACRS method to depreciate the machine, and management thinks the machine would have a value of $26,000 at the end of its 5-year operating life. The applicable depreciation rates are 33%, 45%, 15%, and 7%. Net operating working capital would increase by $24,000 initially, but it would be recovered at the end of the project's 5-year life. Holmes' marginal tax rate is 40%, and a 12% WACC is appropriate for the project.
Calculate the project's NPV. Round your answer to the nearest cent.
$
Calculate the project's IRR. Round your answer to two decimal places.
%
Calculate the project's MIRR. Round your answer to two decimal places.
%
Calculate the project's payback. Round your answer to two decimal places.
years
Assume management is unsure about the $90,000 cost savings-this figure could deviate by as much as plus or minus 20%. What would the NPV be under each of these situations? Round your answers to the nearest cent.
20% savings increase. $
20% savings decrease. $
Suppose the CFO wants you to do a scenario analysis with different values for the cost savings, the machine's salvage value, and the net operating working capital (NOWC) requirement. She asks you to use the following probabilities and values in the scenario analysis:
| Scenario | Probability | Cost Savings | Salvage Value | NOWC |
| Worst case | 0.35 | $72,000 | $21,000 | $29,000 |
| Base case | 0.35 | $90,000 | $26,000 | $24,000 |
| Best case | 0.30 | $108,000 | $31,000 | $19,000 |
Calculate the project's expected NPV, its standard deviation, and its coefficient of variation. Round your answers to two decimal places.
E(NPV) = $
ÏNPV = $
CV =
Would you recommend that the project be accepted?
-Select-yes OR no
