Question and answer
Bender Guitar Corporation, a manufacturer of custom electric guitars, is contemplating a $1,000,000 investment in a new production facility. The economic life of the facility is estimated to be five
years, after which the facility will be obsolete and have no salvage value. To make the new facility operational, building improvements costing $400,000 will be required. In addition, a $50,000 increase in working capital will be needed. Bender's accounting and marketing departments have provided the following information: the firm will use the straight-line method of depreciation; the Company is in the 30% tax bracket; the weighted average cost of capital is 8%. Here are Earnings before Interest and Taxes (EBIT) estimates for the new facility: Year 1.........$80,000 Year 2.......$100,000 Year 3.......$120,000 Year 4........$140,000 Year 5.......$165,000 Your assignment is to answer the following questions: 1. Diagram the cash flows for the project using a time line. For each of Years 1 through 5, include the following data on your diagram (in this order) : EBIT, tax, depreciation, Operating Cash Flow (OCF), and discounted OCF. 2. Indicate the initial investment cost, the present value, the Net Present Value (NPV), and the payback (measured in years based on non-discounted OCF numbers). 3. Evaluate the project's efficacy. Is this facility worthwhile, based upon your calculations ? Why or why not ? What does the NPV decision rule indicate for this project ? If you were Bender's financial manager, what other factors would you consider before deciding whether or not to recommend construction of the production facility ?
Weegy answers basic questions. I can't do your whole assignment for you. For more detailed help you need to pay to use Weegy Research.
Expert answered|debnjerry|Points 11124|
Question
Asked 4/10/2011 5:26:56 PM
0 Answers/Comments
Get an answer
New answers
Rating

There are no new answers.

Comments

There are no comments.

Add an answer or comment
Log in or sign up first.
25,358,063 questions answered
Popular Conversations
A geocentric system is ...
Weegy: A geocentric system is Earth-centered. User: In the past, astronomical observations were an important part of ...
5/29/2016 1:57:09 PM| 3 Answers
What is sfumato?
5/28/2016 9:44:10 AM| 2 Answers
The main purpose of a budget is to
5/28/2016 9:20:36 PM| 2 Answers
An acceptance is complete and effective only when it has been- - ...
Weegy: An acceptance is complete and effective only when it has been communicated to the offerer.
5/28/2016 11:54:15 PM| 2 Answers
coercive
Weegy: The Coercive Acts were meant to reverse the trend of colonial resistance but actually provoked higher levels of ...
5/29/2016 3:19:03 AM| 2 Answers
Which of the following statements does NOT describe how teens can ...
Weegy: In order to gain the maximum benefits from an exercise program, you should include both cardiovascular training ...
5/29/2016 9:17:54 AM| 2 Answers
The wicked witch and the big bad wolf are examples of A. ...
Weegy: A. Dynamic Characters, characters you know and love from fictional stories. User: If an author wanted to ...
5/29/2016 11:33:48 AM| 2 Answers
Simplify -7 + [5 + (-12)÷3] -6 -34/3 -8
5/28/2016 1:03:54 AM| 1 Answers
Weegy Stuff
S
Points 713 [Total 713] Ratings 10 Comments 593 Invitations 2 Offline
S
Points 699 [Total 699] Ratings 13 Comments 569 Invitations 0 Offline
S
Points 643 [Total 643] Ratings 0 Comments 643 Invitations 0 Offline
S
1
L
L
P
R
P
L
P
P
R
Points 295 [Total 12547] Ratings 2 Comments 275 Invitations 0 Offline
S
L
P
P
P
Points 166 [Total 3543] Ratings 0 Comments 166 Invitations 0 Offline
S
Points 38 [Total 107] Ratings 0 Comments 38 Invitations 0 Offline
S
Points 12 [Total 12] Ratings 1 Comments 2 Invitations 0 Offline
S
Points 10 [Total 10] Ratings 1 Comments 0 Invitations 0 Offline
S
L
Points 7 [Total 4099] Ratings 0 Comments 7 Invitations 0 Offline
S
Points 6 [Total 6] Ratings 0 Comments 6 Invitations 0 Offline
* Excludes moderators and previous
winners (Include)
Home | Contact | Blog | About | Terms | Privacy | © Purple Inc.