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Posted by: Homeworkhelp
Price Quoted by Student: $3.5
Posted On: 2011-03-22 02:02:01
 
Question

P12-3 Keener Clothiers Inc. is considering investing $2 million in an automatic sewing machine to

 

ANSWER KEY P12-3 Keener Clothiers Inc. is considering investing $2 million in an automatic

 

P12-3 Keener Clothiers Inc. is considering investing $2 million in an automatic sewing machine to

 

P12-3.  Keener Clothiers Inc. is considering investing $2 million in an automatic sewing machine to produce a newly designed line of dresses.  The dresses will be priced at $200, and management expects to sell 12,000 per year for six years.  There is, however, some uncertainty about production costs associated with the new machine.  The production department has estimated operating costs at 70% of revenues, but senior management realizes that this figure could turn out to be as low as 65% or as high as 75%.  The new machine will be depreciated at a rate of $200,000 per year for six years (straight line, zero salvage).  Keener’s cost of capital is 14% and its marginal tax rate is 35%.  Calculate a point estimate along with best and worst case scenarios for the project’s NPV. 


Solutions
ANSWER KEY P12-3 Keener Clothiers Inc. is consider
Price $3.5
Attachment 1: P12-3 Keener Clothiers Inc.doc
Solution Posted By: Homeworkhelp    Posted on: 22-03-2011