--%>
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 : Difference between capitalization and

    Is the difference for the value creation in a company among the market value of the shares (capitalization) and their book value a good measure since its foundation?

    		•
  • Q : Structure of Interest rates Which

    Which determines the shape of the term structure of Interest rates?

    		•
  • Q : What is the Capital Cash Flow What is

    What is the Capital Cash Flow?

    		•
  • Q : Tax benefits of lease FedEx would like

    FedEx would like to acquire 300 vans for its business. It can buy each van for $35,000, depreciate it completely over 5 years, and then sell it for $10,000. The tax rate of FedEx is 30%, and its cost of debt is 10%. Avis Fleet Rental will lease these vans to FedEx for

    		•
  • Q : Yield to maturity problem Jenny is

    Jenny is looking to invest in some 5-year bonds which pay annual coupons of 6.25 % and are presently selling at $912.34. What is the present market yield on these bonds? (Round to the closest Answer.) (1) 9.5%  (2) 8.5%  (3) 6.5%  (4) 7.5%

  • Q : Did you see Vueling case Did you notice

    Did you notice the Vueling case? How is this possible that an investment bank sets the objective price of its shares in €2.50 per share upon the 2nd of October, 2007, just after replacing Vueling shares at €31 per share in J

    		•
  • Q : What impacts have on value of a

    What impacts have on the value of a business of high inflation?

    		•
  • Q : Explain the way of estimating an average

    Explain the way of estimating an average.

    		•
  • Q : WCR lower cost of storage Inventory is

    Inventory is an important part of WCR estimation. It is a current asset, which depletes over period of time. Also, it requires creation of facility, which would help in storing the inventory and estimate the associated cost of maintaining and transporting it. The esti

    		•
  • Q : Explain company creates value for its

    Is this true that a company creates value for its shareholders in a year when this distributes dividends or when the quotation of the shares increases?

    		•