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Category > Business & Finance Posted 31 May 2017 My Price 11.00

Houston Inc. is considering

Houston Inc. is considering a project which involves building a new refrigerated warehouse which will cost $7,000,000 at year = 0 and which is expected to have before tax operating cash flows of $500,000 at the end of each of the next 20 years. The Net Working Capital required initially is $50,000, no additional NWC is required after year 0. The company’s corporate tax rate is 25%. Depreciation of $350,000 is included in the before tax operating cash flow. In year 20 the asset can be sold before tax at $75,000. Part I: If Houston's WACC is 8 percent, what is the project’s NPV? IRR? PI? Payback? Determine the capital budget for Years 0 – 20 and perform the necessary capital budget analysis. Part II: The risk/sensitivity factor is WACC. Should WACC increase to 8.5 percent, could this influence your decision on the project? What would happen to NPV?

 

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Status NEW Posted 31 May 2017 04:05 AM My Price 11.00

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