--%>
Assignment Help - homework help

DCF Analysis

AB Corp. is in the business of making white-board markers. They are computing the potential of investing in some new equipment that will enhance their manufacturing process.  The initial cost of the latest machinery is $470,000 plus a one-time installation cost of $5,000. All ongoing fixed costs correlated to production are $93,500 per year and variable cost of production is $0.18 per marker produced.  Sales predicts for markers are 250,000 units per year over the subsequent 5 years that is also the peak life expectancy of the new machinery.  You have signed an agreement with a third party to sell the machinery at 7.5% of initial cost (that is, excluding installation) at the end of the 5 years. The company’s needed return on this project is 12% per year, their corporate tax rate is 38% and the machinery falls into a 25% CCA class.

Based on the above details what must be the minimum selling price per marker?

   Related Questions in Corporate Finance

  • Q : Broad research methodologies Various

    Various broad research methodologies are available with which to study the development of accounting theory. a. Discuss the deductive, inductive, normative, and empirical research methods.  

  • Q : Explain market efficiency hypothesis

    According to what I read inside a book, market efficiency hypothesis means that the expected average value of variations is zero in the shares price. Thus, the best estimate of the future price of a share is its price now, as this incorporates all the available inform

    		•
  • Q : Explain Butterfly Spread Strategies

    Butterfly Spread Strategies: In this strategy, there is no limit on the number of options that can be combined to form the butterfly spread. This strategy essentially combines both the bear spread and the bull spread. In this case, options with three

    		•
  • Q : What is EBITDA What are Earnings before

    What are Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA)?

    		•
  • Q : What is Money Spreads Money Spreads :

    Money Spreads: Option trading strategies can be classified into various types like those pertaining to combination of one option with another option or set of options, other derivative contracts, stocks, etc. This paper focuses mainly on money spreads

    		•
  • Q : Problem on Yield to maturity Shawna

    Shawna desires to invest her recent bonus in a 4-year bond which pays a coupon of 11 % semi-annually. The bonds are selling at $962.13 nowadays. When she buys such bond and holds it to the maturity, what would be her yield? (Round to the nearest answer.) (i) 11.5%&nbs

    		•
  • Q : Who described option pricing with

    Who described option pricing with deterministic volatility?

    		•
  • Q : Strategy of Bull Spread State when

    State when market is expected to go up then what is the Strategy of Bull Spread?

    		•
  • Q : Explain accurately value bond options

    If the model could not even find bond prices right, how could this hope to accurately value bond options?

    		•
  • Q : Financial statements The concept of

    The concept of conservatism has been influential in the development of accounting theory and practice.  A major effect of conservatism is that accountants tend to recognize losses but not gains.  For example, when the value of an asset is impaired, it is wri

    		•