CHARITY AND SPONSOR ADS
Shopping Cart
0 items
 

Homer Corp is considering whether it should produce its newly invented Swing set

Homer Corp is considering whether it should produce its newly invented Swing set
Click to enlarge
Price: $14.99
Availability: In Stock
Model: A
Average Rating: 5 out of 5 Stars!

INSTANT DOWNLOAD

Solution Guide / Answer Key:

FINANCE

Homer Corp is considering whether it should produce its newly invented Swing set. To bring this product to the market will require the purchase of equipment costing $600,000. Shipping and installation expenses associated with the equipment are estimated to be $50,000. In addition, net working capital investments of $50,000 will be required to get production started. No additional investments in net working capital will be required in subsequent years.

Revenues are expected to be $250,000 in the first year and grow at a rate of $25,000 per year until the project is terminated at the end of the fourth year. Annual operating expenses (excluding depreciation) are expected to be $80,000 in the first year and to grow at a rate of $10,000 per year until the end of the project’s life. Depreciation will be under MACRS for a 3-year class asset, with depreciation rates of 33 percent, 45 percent, 15 percent, and 7 percent. The salvage value of the equipment at the end of four years is expected to be $50,000. Homer Corp pays taxes at the 40 percent rate, and its cost of capital is 15 percent.

Based on its Net Present Value (NPV), should the Swing Set be produced?

 

FILE: MS WORD

Write Review
Your Name:


Your Review: Note: HTML is not translated!

Rating: Bad            Good

Enter the code in the box below:

There are no additional images for this product.