Looking for help with an assignment? Connect with an assignment Expert Now!

Calculate the NPV of the Electrobicycle project.

When a business considers investing in a new project, the decision must be carefully evaluated. Businesses should invest in projects that are expected to add value to the company. One method to determine the added value of a project is net present value (NPV) analysis. NVP analysis determines the present value of the benefits and costs of a project. If the project’s NPV is greater than $0, then the project is considered to add value to the company. For this discussion, you will practice calculating the added value of project using the NPV.

Prepare:

Prior to beginning work on this discussion forum,

For the initial post, you will complete the NPV problem below. You will not be able to see other students’ posts until you post your initial post.

Problem:

A large auto company has just completed the research and development (R&D) on a new product, the Electrobicycle. The Electrobicycle is an electronic, climate-controlled bicycle with zero emissions. The R&D efforts focused on developing the capability to utilize electricity to power bicycles. Ultimately, the auto company expects Electrobicycles to be popular for most urban citizens due to convenience and low cost.

The R&D, which cost $3 million, is complete and paid for. The plant and equipment to mass produce the Electrobicycles will cost $2 million. This plant and equipment will be depreciated over 5 years using the straight-line method to zero book value ($400,000 per year). A working capital investment of $1 million will be needed at the beginning of the project. A working capital investment of $200,000 per year will be needed thereafter.

At the end of 5 years, the auto company believes there will be no more sales opportunities for Electrobicycles and will cease all production. Thus, at the end of the project, all working capital investments (the $1 million initial investment and the $200,000 per year) will be recovered at full value. The plant and equipment will be scrapped for a salvage value of $300,000 (after tax).

The company expects moderate sales in years 1 and 2, and then significant growth in each year thereafter as consumers adopt the Electrobicycles. Revenues and earnings will cease at the end of Year 5. The revenues, after-tax earnings, and cash flow for the 5-year life of the project are shown in this table.

Table 1

Projected Electrobicycle Financial Projection

Numbers in $000’s

TodayYear 1Year 2Year 3Year 4Year 5Revenues$1,000$1,500$3,000$6,000$12,000After-tax earnings($500)$100$300$600$1,200Project Cash FlowAfter-tax earnings($500)$100$300$600$1,200Plus: Depreciation$400$400$400$400$400Less: Cost of plant, equipment($2,000)$0$0$0$0$0Less: Working capital($1,000)($200)($200)($200)($200)($200)Plus: Recovery of working capitaln/an/an/an/a$2,000Plus: Salvage valuen/an/an/an/a$600Annual project cash flow($300)$300$500$800$4,000

Note: n/a = not applicable

Calculate:

  • Determine the NPV for the Electrobicycle project. Use the annual project cash flow from the table above. For the required rate of return, use the percent value from your birthday date. For example, if your birthday falls on the 16th of the month, the required rate of return would be 16%.
    • For guidance, review Section 7.1 of the textbook, NPV Example: The Pizza Scooter Delivery Project Revisited.

Write:

In your post, include the following:

  • Calculate the NPV of the Electrobicycle project. Be sure to show your NPV calculations.
  • Explain, in your own words, why working capital investments are subtracted each year in the cash flows.
  • Explain, in your own words, the meaning of the required rate of return for the project.
  • Assume the auto company has a required rate of return of 15%. Based on the required rate of return you used for the Electrobicycles (based on your birthday date), is the Electrobicycle project more or less risky than the auto company? Explain your answer.
  • Based on your concluded NPV, should the company invest in this project to build Electrobicycles? Justify your answer.

Guided Response: Review several of your colleagues’ posts, and reply to at least two of your peers by 11:59 p.m. on Day 7 of the week. You must respond to two classmates who have completed different calculations than you. In your written responses to your classmates, address the following:

  • Confirm the calculations or explain a correction to the calculation in the initial post.
  • Compare how the required rate of return you used differs from your classmate’s rate of return.
  • Explain how the different rate of returns impacted the concluded NPV.
  • Explain why the salvage value is added to the cash flows in the final year of the project.

Get a Quick Quote

Approximately 250 words
Total price (USD) $: 10.99

Reviews from Clients who Ordered From Us:

Carol James

I received help with a major task on Macroeconomics Studies. I already got feedback from my professor and he`s fully satisfied with the final result. All the calculations were correct. Also, I liked the structure my writer opted for, it was unusual but helped highlight the principal points.

James Knight

Ordered a brand new CV from them a couple of weeks ago. Today, I got a job offer from one of the companies I applied to. It worked! Definitely, will recommend your company from now on.

Sheena Orozco

I`ve been working with this website for over a year! Here`s what I liked the most about them. First, quality of writing (creative and with catchy titles). Secondly, friendly and quick support. And the last one, truly affordable prices for students

Michelle Butler

Quality proofreading and plagiarism check. Affordable prices.

Bo ming Liu

Nice job, many thanks!

Ashley Foxworth

Excellent! Thanks so much 🙂

Sheehan Fernando

Thanks to the writer, my grade for this assignment is 100%! Good job, thank you!

Karen Intriago

The most important feature of this company is their respect for deadlines. My order was completed even before the deadline. Got A- for the task;)

George McKinney

Not even a single mistake or type in the papers they provide! All the writing is always well-proofread and structured. Also, you, guys, are soo friendly. Love your service^^

Kate McGray

Found a lot of helpful tips on the blog and service pages here. Plus, ordered an essay on Literature once. Liked their friendliness and attitude to writing.

★★★★★

Steve Banon

FLAWLESS. Thank you so much! I`ll definitely recommend

Derrick Mckinney

Quality proofreading and plagiarism check. Affordable prices.

Sheena easton

I`ve been working with this website for over a year! Here`s what I liked the most about them. First, quality of writing (creative and with catchy titles).

Kate Hogan

They are my go to assignment helper and have been a great help. Thank you!

Our Benefits

Get your essay writing needs completed by us and enjoy these and more benefits:

Fast

Whether you have a last minute discussion post due in a couple of hours or the last day in class and you totally forgot to work on that research paper, we always put everything aside to save your grade

Custom Essay

Our qualified team of experts have access to varied online library databases to help with recent and well researched tools that help in writing your paper to deliver a profound research that earns you a stellar grade

80+ Subjects

We do not turn down any type of work. We have qualified writers holding bachelors, graduate and Doctoral certificates matched with skill and expertise. Get help with homework acroos varied subject

Real Time Tracking

We have a user friendly interface to help you track the progress on your order from your client portal. Additionally, with each and every step, you will get notified on the status of your paper to give you an easy time to do other kinds of stuff

Order Our Custom Essay Writing Service

1. Making an Order Tip and Tricks

  • Choose the type of assignment, topic, subject, length, and deadline for your paper.
  • Indicate the following order parameters: service, chosen writer level, number of cited sources, and citation style.
  • Add your document or provide instructions for paper in a specific form.
Image showing step 1 of making an order
Image showing how to make payment for your order

2. Tips and Tricks for Choosing the Right Writer

  • Log in using your email address or your Facebook account.
  • A list of suitable writers will be offered to you. Before making a selection, you can read testimonials or engage in a Live Chat with authors.
  • Check your balance and, if necessary, add funds to your account. Here you will also find exclusive bargains.
  • Put money into the account of the chosen writer.

3. Tips and Tricks for Supervising the Writing Process

  • Get the chance to keep track of the process and connect with your writer.
  • If required, include updated instructions.
  • Have a conversation with your author.
Image showing how to supervise writing process
Image showing how to download your completed results

4. Tips and Tricks to Enjoy the Results

  • You will receive the paper. You have the option of requesting modifications if they are required. Before giving it back to the writer, make a list of the adjustments that need to be made.
  • Accept the paper and send the money to the author.
  • Rate your writer, submit your request, then sit back and enjoy the results.

How can we even make your school life easier with our services?

We always strive to provide the best techniques and skills that help your essay a stellar paper. We have achieved this through the years by offering features such as:

Progressive Delivery

Your order is assigned to a writer who delivere’s your bulk research projects in small chunks and making edits upon feedback from the professor

Native Writers

Our writers are varied across different coutnries such s Canada, Australia, U.K and the United States. Request a native speaker writer to help you ace that paper

Powerpoint slides & other visuals

Order a visual such as Powerpoint to better expound your research paper at $10 per slide including speaker notes

Top rated writers

Order from among the top 10 rated writers at no extra cost