Webmasters.com has developed a powerful revolutionary server that would be used for corporations Internet activities. It would cost $10 million a the equipment necessary to manufacture the server. The project would hire net working capital at the beginning of for each one year in an am 10% of the years projected sales; for example, NWC0 = 10%( sales1). The servers would sell for $24,000 per building block, and Webmasters believ costs would amount to $17,500 per unit. After course 1, the sales price and variable costs will affix at the inflation graze of 3%. The com nonvariable costs would be $1 million at Year 1 and would attach with inflation.
The server project would have a life of 4 years. If the project is undertaken, it must be continued for the entire 4 years. Also, the projec expected to be highly correlated with returns on the firms former(a) assets. The firm believes it could sell 1,000 units per year.
The equipment would be depreciated over a 5-year period, utilize MACRS rates. The estimated market value of the equipment at the en 4-year life is $500,000. Webmasters federal-plus-state measure rate is 40%. Its cost of capital is 10% for average-risk projects, outlined as pro coefficient of variation of NPV between 0.8 and 1.2.
Low-risk projects are evaluated with a WACC of 8%, and high-risk projects at 13%. a. Develop a spreadsheet model, and use it to find the projects NPV, IRR, and payback. Key take: share 1. Input Data (in thousands of dollars) Equipment cost Net WC/Sales First year sales (in units) Sales price per unit Variable cost per unit Nonvariable costs $10,000 10% 1,000 $24.00 $17.50 $1,000
mart value of equipment at Year 4 Tax rate WACC Inflation
Part 2. Depreciation and Amortization Schedule Year sign Cost Equipment Deprn Rate Equipment Deprn, Dollars Ending Bk Val: Cost Accum Deprn Part 3. Net Salvage fosters, in Year 4 Estimated foodstuff Value in Year 4 Book Value in Year 4 Expected Gain or Loss Taxes paid or tax...If you want to get a full essay, order it on our website: Orderessay
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