Friday
April 18, 2014

Homework Help: Finance ( Need help )

Posted by Alexis on Thursday, July 30, 2009 at 8:05pm.

TexMex Food Company is considering a new salsa whose data are shown below. The equipment to be used would be depreciated by the straight-line method over its 3-year life and would have a zero salvage value, and no new working capital would be required. Revenues and other operating costs are expected to be constant over the project's 3-year life. However, this project would compete with other TexMex products and would reduce their pre-tax annual cash flows. What is the project's NPV? (Hint: Cash flows are constant in Years 1-3.)

WACC
10.0%
Pre-tax cash flow reduction for other products (cannibalization)
-$5,000
Investment cost (depreciable basis)
$80,000
Straight-line depr. rate
33.333%
Sales revenues, each year for 3 years
$63,500
Annual operating costs (excl. depr.)
-$25,000
Tax rate
35.0%

The answer i chose was - 2,612 but i have a feeling it was wrong and if it rights it was by chance.It doesn't feel like I got it the right way . Need help

Answer this Question

First Name:
School Subject:
Answer:

Related Questions

Finance - 20. TexMex Products is considering a new salsa whose data are shown ...
Corporate Finance - 1. TexMex Products is considering a new salsa whose data are...
Finance - Delta Software is considering a new project whose data are shown below...
Finance - Delta Software is considering a new project whose data are shown below...
Finance - Delta Software is considering a new project whose data are shown below...
Finance - Temple Corp. is considering a new project \vhose data are shown below...
Finance - Thomson Media is considering some new equipment whose data are shown ...
Finance - Thomson Media is considering some new equipment whose data are shown ...
od - Temple Corp. is considering a new project whose data are shown below. The ...
Finance - Your company is considering a replacement of an old delivery van with ...

Search
Members