Business, 08.03.2021 20:20, sevindjdna
Consider a project to supply Detroit with 20,000 tons of machine screws annually for automobile production. You will need an initial $3,200,000 investment in threading equipment to get the project started; the project will last for 4 years. The accounting department estimates that annual fixed costs will be $700,000 and that variable costs should be $190 per ton; accounting will depreciate the initial fixed asset investment straight-line to zero over the 4-year project life. It also estimates a salvage value of $350,000 after dismantling costs. The marketing department estimates that the automakers will let the contract at a selling price of $310 per ton. The engineering department estimates you will need an initial net working capital investment of $320,000. You require a return of 13 percent and face a marginal tax rate of 22 percent on this project.
Required:
a. What is the estimated OCF for this project?
b. What is the estimated NPV for this project?
Answers: 1
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Consider a project to supply Detroit with 20,000 tons of machine screws annually for automobile prod...
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