--%>
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 : Public Finance which type of tax,

    which type of tax, direct or indirect is applicable in underdeveloped countries? Why? Show your critical areas and weaknesses.

    		•
  • Q : Evaluating Beta of a Corporation

    Baldwin Corporation is planning to expand into the business of providing on-demand movies. Baldwin has debt-to-equity ratio of .25, its pretax cost of debt is 9%, and its marginal tax rate is 40%. The Harrington Corporation is already in the on-demand movie business,

    		•
  • Q : What are Workpapers Workpapers : In

    Workpapers: In finance world, work papers are documents which are created during the procedure of computing the financial records of a business or individual. The accounting professional which is tasked with examining the book-keeping of a business mi

    		•
  • Q : Problem on exponential growth rate

    Atlanta Company stock is predicted to follow an exponential growth rate. The relationship among the current stock price P0, future price PT after time T, and continuously compounded rate of the return r, is: PT = P0eγT. The stock doesn’t pay any

    		•
  • Q : Convertible Bonds-Corporate Bonds State

    State the term Convertible Bonds in Corporate Bonds?

    		•
  • Q : NPV and Other Investment Criteria The

    The XYZ Manufacturing Company is considering the below investment proposal. The initial investment is $100,000. It was an expected economic life of 10 years. The net cash flow in the initial year is expected to be $25,000 and annual net cash flow is expected to develo

    		•
  • Q : Explain new methodology of standard

    Explain new methodology of standard market practice.

    		•
  • Q : What is Regular meeting of day-to-day

    Regular meeting of day-to-day commitments: The estimation of WCR also helps to ensure that there is positive WC existence. This proves helpful in meeting requirements which are regular in nature such as payments of salaries, wages, rental charges etc.

    		•
  • Q : How could prestigious investment bank

    I have a doubt about the Enron case. How could this prestigious investment bank advice investing while the quotations of the shares were falling?

    		•
  • Q : What are flow variables Flow variables

    Flow variables: Any variable, whose magnitude is evaluated over a time period, is termed as glow variable.

    		•