You have new items in your feed. Click to view.
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.
25,964,135 questions answered
Popular Conversations
The organizational structure of a corporation permits: a. the company ...
Weegy: The organizational structure of a corporation permits a. the company management to elect the Board of ...
8/28/2016 11:26:05 PM| 2 Answers
Communication is considered ethical if it ...
8/29/2016 10:21:58 AM| 2 Answers
It is computed when the data is discrete and therefore incremental ...
Weegy: Arc elasticity. User: Goods & services used for final consumption is called
8/28/2016 12:49:28 AM| 1 Answers
Weegy Stuff
S
Points 782 [Total 853] Ratings 5 Comments 732 Invitations 0 Offline
S
1
L
Points 657 [Total 1491] Ratings 3 Comments 627 Invitations 0 Offline
S
L
P
P
P
P
Points 653 [Total 3908] Ratings 0 Comments 653 Invitations 0 Offline
S
Points 151 [Total 151] Ratings 0 Comments 151 Invitations 0 Offline
S
Points 58 [Total 285] Ratings 0 Comments 58 Invitations 0 Offline
S
L
P
P
P
Points 46 [Total 3862] Ratings 0 Comments 46 Invitations 0 Offline
S
Points 40 [Total 45] Ratings 0 Comments 0 Invitations 4 Offline
S
Points 15 [Total 15] Ratings 0 Comments 5 Invitations 1 Offline
S
L
C
Points 11 [Total 4491] Ratings 1 Comments 1 Invitations 0 Offline
S
Points 10 [Total 10] Ratings 1 Comments 0 Invitations 0 Offline
* Excludes moderators and previous
winners (Include)
Home | Contact | Blog | About | Terms | Privacy | © Purple Inc.