Please do not give solution in image format thanku Initial Investment = 500,000Salvage Value = 0Useful Life = 5 yearsAnnual Depreciation = (Initial Investment - Salvage Value) / Useful LifeAnnual Depreciation = (500,000 - 0) / 5Annual Depreciation = 100,000YearCBDTLess:DepriciationCBTLess: tax 55%Net incomeAdddepreciationNet cash flow11000001000000002100000100000O00100000100000100000 100000315000015000010000010000050,000 50,00027500275002250022500100000122500250000100000150,0008250067500100000100000122500 167500 5. Question. A chemical company is considering investment ina project that costs Rs.500000. The life of the project is 5years and estimated salvage value is zero. Tax rate is 55%.The company uses straight line depreciation and proposedproject has earnings before depreciation and before tax asfollows:Year Earnings before depreciations & PV factor @15%Tax (Rs.)11,00,00021,00,0003 1,50,0004 1,50,0005 2,50,0000.8700.7560.6580.5720.497Calculate the following: -1. Payback period2. Average rate of returnNet present value @15%

Payback Period is that period under which investor will received his invested amount return without…

Answered: 5. Question. A chemical company is…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Q. A company is considering an investment proposal to install a new milling machine. The project will cost Rs.50,000. The facility has a life expectancy of 5 years and no salvage value. The company tax rate is 40%. The firm uses the straight-line method for depreciation. The estimated earnings before tax from the proposed investment plan are as under. Year Earning before tax 1 Rs. 22,000 2 18,000 3 14,000 4 15,000 5 25,000 Compute cash flow for 5 years. Calculate: 1. Payback period2. Profitability Index3. IRR4. NPV( discount rate is 15%)5. Discounted Payback6. MIRR
A company has purchased a machine (CCA rate 24%) at $300,000 and has a tax rate of 33.00%. By how much will the NPV change if the company is able to obtain a $13,000 salvage value for its machine at the end of the project's life in Year 4? Assume a discount rate of 11.20% and that all else remains the same. Question 10Answer a. $8,502 b. $10,415 c. -$1,913 d. $6,589 e. $10,075
A company has purchased a machine (CCA rate 27 %) at $232,000 and has a tax rate of 38.00%. By how much will the NPV change if the company is able to obtain a $15,000 salvage value for its machine at the end of the project's life in Year 4? Assume a discount rate of 10.10% and that all else remains the same. a. $13,031 b. $10,208 c. - $2,823 d. $7,385 e. $10,852
57. An asset was purchased for P66,000. The asset is expected to last for 6 years and will have a salvage value of P16,000. The company expects the income before tax to be P7,200 and the tax rate of the company is 30%. What is the average return on investment (accounting rate of return)? Group of answer choices 17.6% 10.9% 12.3% 7.6%
Equipment with a book value of $11,000 will be sold at the end of a project for a salvage value of $8,000. The tax rate is 30%. What is the tax effect resulting from the profit or loss from the sale of the equipment (where a negative number means tax is payable and a positive number means that there is a tax shield)? Question 2Answer a. $900 b. $-900 c. $3300 d. $-3300
A company is considering a 3-year project with a projected net income of sh. 4M, 6M,5M in year 1, year 2 and year 3 respectively. The initial investment is sh. 40M and the salvage value is sh.2M.The company applies the straight line method for depreciating its assets, what is the Accounting Rate of Return? Assume a tax rate of 30% Select one: A. 26.3% B. 23.8% C.25% D. None of the above
9. The Lumber Yard is considering a 5-year project that requires initial investment of $96,000 in fixed assets that will be depreciated using the straight-line method to a zero over its 6-year tax life. The company has a marginal tax rate of 32%. If the fixed assets can be sold at $20,000 at the end of the project, how much is the after tax salvage value? A. $5,120 B. $17,280 C. $13,160 D. $25,440 10. A credit card company quotes you an APR of 18%. What is the actual rate of interest you are paying if interest is computed monthly? A. 18.90% B. 19.20% C. 20.62% D. 19.56%
This question is based on the following in formation: An investment is Machinery costing P 250,000 with a 4-year life and no salvage value is expected to produce the following net income after taxes of 30%: End of year 1 P 17,000 2 22,000 3 25,000 4 26,000 How much is the annual tax shield?How much is the annual tax shield?A. P 17,580B. P 17,850C. P 18,570D. P 18,750What is the ROI (using the cash income)? A. 6.3%B. 9%C. 31.3%D. 34%
A company is considering an investment proposal to install new milling machine. The project will cost Rs.50,000. The facility has a life expectancy of 5 years and no salvage value. The company tax rate is 40%. Firm uses straight-line method for depreciation. The estimated earnings before tax from the proposed investment plan are as under. Year Earning before taxRs. 22,00018,00014,00015,00025,000 Compute cash flow for 5 years. Calculate:Payback periodProfitability IndexIRRNPV( discount rate is 15%)Discounted PaybackMIRR
5. A firm has invested $50,000 in equipment with a 5-year useful life. The machinery will have a salvage value of $5,000. The annual benefits from the machinery are $13,000 for the first year and increase by $2,000 per year. Assume a combined 30% income tax rate, and the firm uses the SOYD depreciation. (a) () Calculate the before-tax IRR. O 16.7%/year O 18.9%/year O 20.6%/year O 21.8%/ycar Question 11 (b) ( is) Calculate the after-tax IRR. O 11.9%/ycar O 13.3%/ycar O 14.2%/year O 15.2%/year
The tax rate of the company is 55% and it uses straight line method of depreciation. The Question. 3. A company is considering an investment proposal to install a estimated cash flows before tax (CFBT) are 10,000; 11,000; 14,000; 15,000 and v machinery. The project will cost 50,000 with life of 5 years and no salvage value. new 25,000 during years 1,2,3,4 and 5 respectively. Compute: (i) Average rate of return. (ii) NPV at 10% discount rate. (iii) Profitability Index at 10% discount rate. Note : Discount factors at 10% are 0.909, 0.826, 0.751, 0.683 and 0.621 for the years 1,2,3,4 and 5.
Jitihadi Itd intends to invest in a project whose cost is sh 1,200,000. The project is expected to have a useful life of 5 years with a residual value of shs 200,000. The following are the expected profits before depreciation and taxes for 5 years. Year Profit before depreciation and tax (shs) 1 480,000 2 320,000 600,000 4 450,000 500,000 Additional information: i. The company uses straight line method in calculating depreciation. ii. The corporation tax rate is 30% iii. The cost of capital is 12% Required: i. Calculate the net present value of the project ii. Advice the management whether the project is viable

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