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  3. 1. a new hog investment requires an initial outlay

1. A new hog investment requires an initial outlay of $130,000 and is expected to increase operating...

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Accounting

1.A new hog investment requires an initial outlay of $130,000 and isexpected to increase operating receipts by 87,000 but will alsoincrease operating expenses by 23,000. The investment will bedepreciated over 15 years and will have a $0 salvage value. Themarginal tax rate is 30%. The investment will be analyzed over 7years and the terminal value of the hog investment after 7 yearswill be $45,000. The pre-tax discount rate is 13.5%. What is theNPV?

Based on the previous question, what is the IRR?

Based on your previous answers, would you invest in thisproject? Why or why not?

Answer & Explanation Solved by verified expert
4.2 Ratings (829 Votes)
New hog investment NPV Y0 Y1 Y2 Y3 Y4 Y5 Y6 Y7 Total Calculation of straight line depreciation Investment 13000000 13000000 Operating Expenses 2300000 2300000 2300000 2300000 2300000 2300000 2300000 16100000 Purchase cost 13000000 Depreciation 1857143 1857143 1857143 1857143 1857143 1857143 1857143 13000000 Life Years 700 Savings in costs 8700000 8700000 8700000 8700000 8700000 8700000 8700000    See Answer
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