Purchase Solution

# Finance: Capital budgeting.

Not what you're looking for?

Howell Petroleum is considering a new project that complements its existing business. The machine required for the project costs \$1.8 million. The marketing department predicts that sales related to the project will be \$1.1 million per year for the next four years, after which the market will cease to exist. The machine will be depreciated down to zero over its four-year economic life using the straight-line method. Cost of goods sold and operating expenses related to the project are predicted to be 25 percent of sales. Howell also needs to add net working capital of \$150,000 immediately. The additional net working capital will be recovered in full at the end of the project's life. The corporate tax rate is 35 percent. The required rate of return for Howell is 16 percent. Should Howell proceed with the project?

##### Solution Summary

The problem set deals with determining the net present value of presented information.

##### Solution Preview

The solution is presented in a Word document.

The solution is clear and concise.

Thank you.

CALCULATING NPV

Howell Petroleum is considering a new project that complements its existing business. The machine required for the project costs \$1.8 million. The marketing department predicts that sales related to the project will be \$1.1 million per year for the next four years, after which the market will cease to exist. The machine will be depreciated down to zero over its four-year economic life using the straight-line method. ...

Solution provided by:
###### Education
• B. Sc., University of Nigeria
• M. Sc., London South Bank University
###### Recent Feedback
• "Thank you."
• "thank you Chidi Ngene.. if you have any APA references would be great"
• "Thank you so much for your help, your explanations were easy to understand and apply!"
• "are you able to highlight the equations used either on the xlsx or a word doc as to how each graph was formed- overall looks fine i just need help understanding this myself"
• "Chidi Ngene, M. Sc. Was extremely helpful as without the help and guidance I would have failed, but with the help I passed. I still have a lot to learn and in need of the guidance to understand and learn more on the subject. I would recommend Chidi Ngene and BrainMass to anyone that are in need of help. Thank you!!"

##### Pricing Strategies

Discussion about various pricing techniques of profit-seeking firms.

##### Elementary Microeconomics

This quiz reviews the basic concept of supply and demand analysis.

##### Basics of Economics

Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.

##### Economic Issues and Concepts

This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.

##### Economics, Basic Concepts, Demand-Supply-Equilibrium

The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.