Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. accounting
  3. lander company has an opportunity to pursue a capi

Lander Company has an opportunity to pursue a capital budgeting project with a five-year time...

80.2K

Verified Solution

Question

Accounting

Lander Company has an opportunity to pursue a capital budgeting project with a five-year time horizon. After careful study, Lander estimated the following costs and revenues for the project:

Cost of equipment needed $ 330,000
Working capital needed $ 70,000
Overhaul of the equipment in two years $ 23,000
Annual revenues and costs:
Sales revenues $ 450,000
Variable expenses $ 230,000
Fixed out-of-pocket operating costs

$

100,000

The piece of equipment mentioned above has a useful life of five years and zero salvage value. Lander uses straight-line depreciation for financial reporting and tax purposes. The companys tax rate is 30% and its after-tax cost of capital is 13%. When the project concludes in five years the working capital will be released for investment elsewhere within the company.

Click here to view Exhibit 13B-1 and Exhibit 13B-2, to determine the appropriate discount factor(s) using tables.

Required:

Calculate the net present value of this investment opportunity. (Negative amounts should be indicated by a minus sign. Round discount factor(s) to 3 decimal places.)

Answer & Explanation Solved by verified expert
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students