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.
17,617,578 questions answered
Popular Conversations
antonym of prevented ...
10/1/2014 9:05:38 AM| 3 Answers
Simplify the expression. (3x - 1)(x^2 + 2x - 4) User: 3x+2(x+5) ...
Weegy: 1+tan^2(x) = sec^2(x) 1+cot^2(x) = csc^2(x) (1+tan^2(x)) / (1+cot^2(x) = sec^2(x) / csc^2(x) = ...
10/1/2014 1:46:20 AM| 3 Answers
The pressure of ocean water increases as depth increases. User: The ...
Weegy: It originates in the Gulf of Mexico and, as the Florida Current, passes through the Straits of Florida and then ...
9/30/2014 6:27:02 AM| 3 Answers
The densest ocean water is generally found a. in the surface ...
Weegy: A. in the surface zone User: In which zone is ocean temperature most affected by the weather? a. transition ...
9/30/2014 6:07:25 AM| 3 Answers
Who is Harry Bailly?
10/1/2014 11:54:52 AM| 2 Answers
What is an overdraft?
10/1/2014 11:23:22 AM| 2 Answers
People who have a common cultural background and a common sense of ...
Weegy: People who have a common cultural background and a common sense of identity is a people of race. User: The ...
10/1/2014 10:50:53 AM| 2 Answers
consumer rights.
Weegy: A consumer is a person or group of people that are the final users of products generated within a social system. ...
10/1/2014 10:14:56 AM| 2 Answers
Simplify the expression.(3 + i) - (2 - 2i)
Weegy: 3-3 = 0 User: What is the expression in factored form 9x2 - 12x + 4 A. (-3x - 2)2 B. (-3x + 2)(3x - 2) C. (3x ...
10/1/2014 9:57:26 AM| 2 Answers
Weegy Stuff
S
L
1
L
P
C
1
P
C
1
Points 68 [Total 9550]| Ratings 0| Comments 68| Invitations 0|Online
S
1
L
L
Points 24 [Total 5818]| Ratings 0| Comments 24| Invitations 0|Offline
S
1
L
1
L
P
P
L
Points 15 [Total 12244]| Ratings 0| Comments 15| Invitations 0|Offline
S
1
L
1
Points 10 [Total 3354]| Ratings 1| Comments 0| Invitations 0|Offline
S
P
C
L
P
L
1
Points 6 [Total 6240]| Ratings 0| Comments 6| Invitations 0|Offline
S
Points 2 [Total 37]| Ratings 0| Comments 2| Invitations 0|Offline
S
Points 1 [Total 214]| Ratings 0| Comments 1| Invitations 0|Offline
S
1
L
Points 1 [Total 3077]| Ratings 0| Comments 1| Invitations 0|Offline
Points 0 [Total 0]| Ratings 0| Comments 0| Invitations 0|Offline
Points 0 [Total 0]| Ratings 0| Comments 0| Invitations 0|Offline
Home | Contact | Blog | About | Terms | Privacy | Social | ©2014 Purple Inc.