TexMex Food Company (Products): Finding a Project's NPV
Not what you're looking for?
TexMex Products is considering a new salsa whose data are shown below. The equipment that would be used would be depreciated by the straight-line method over its 3-year life, would have 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 in other products (cannibalization) $5,000
Investment cost (depr'ble basis) $65,000
Straight-line depr'n rate 33.333%
Sales revenues, each year $75,000
Annual operating costs, ex. depr'n $25,000
Tax rate 35.0%
a. $25,269
b. $26,599
c. $27,929
d. $29,325
e. $30,792
Purchase this Solution
Solution Summary
This solution explains and provides the calculations for the NPV of the following project. An Excel attachment is provided as well.
Solution Preview
Please see the attached file.
The NPV is calculated as
Year 0 1 2 3
Cash fow reduction (5,000.00) (5,000.00) (5,000.00)
Sales ...
Purchase this Solution
Free BrainMass Quizzes
Marketing Research and Forecasting
The following quiz will assess your ability to identify steps in the marketing research process. Understanding this information will provide fundamental knowledge related to marketing research.
Marketing Management Philosophies Quiz
A test on how well a student understands the basic assumptions of marketers on buyers that will form a basis of their marketing strategies.
Learning Lean
This quiz will help you understand the basic concepts of Lean.
Cost Concepts: Analyzing Costs in Managerial Accounting
This quiz gives students the opportunity to assess their knowledge of cost concepts used in managerial accounting such as opportunity costs, marginal costs, relevant costs and the benefits and relationships that derive from them.
Employee Orientation
Test your knowledge of employee orientation with this fun and informative quiz. This quiz is meant for beginner and advanced students as well as professionals already working in the HR field.