A firm must decide between two silicon layer chip designs from Intel. Their effective income tax rate is 24%, and MACRS depreciation is used. If the desired after-tax return on investment is 12% per year, which design should be chosen? Design A Design B $1,140,000 $960,000 $1,810,000 $1,110,000 Capital investment MV at end of useful life Annual revenues less $250,000 $370,000 expenses 5 years 7 years 5 years 6 years MACRS property class Useful life Click the icon to view the GDS Recovery Rates (r,) for the 5-year property class. ..... Calculate the AW value for the Design A. AWA(12%) = $| (Round to the nearest dollar.) Calculate the AW value for the Design B. AWR(12%) = S (Round to the nearest dollar.) Based on the AW values, should be chosen.

A firm must decide between two silicon layer chip designs from Intel. Their effective income tax rate is 24%, and MACRS depreciation is used. If the desired after-tax return on investment is 12% per year, which design should be chosen? Design A Design B $1,140,000 $960,000 $1,810,000 $1,110,000 Capital investment MV at end of useful life Annual revenues less $250,000 $370,000 expenses 5 years 7 years 5 years 6 years MACRS property class Useful life Click the icon to view the GDS Recovery Rates (r,) for the 5-year property class. ..... Calculate the AW value for the Design A. AWA(12%) = $| (Round to the nearest dollar.) Calculate the AW value for the Design B. AWR(12%) = S (Round to the nearest dollar.) Based on the AW values, should be chosen.

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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A startup company has a fixed capital investment of Ph 500,000 and minimum working capital. The salvage value is set at Php 15,000. Calculate the a) Return on Investment and b) the Payback Period. If the mar is 25%, is the project profitable or not? Year After Tax Earning 1 201079.1 2 49051.48 3 145381.1 4 89021.41 22509.13 221273.2 7 134490.4 8 273262 9 146166.3 10 63456.84
Vijay
NPV. Grady Precision Measurement Tools has forecasted the following sales and costs for a new GPS system: annual sales of 45,000 units at $16 a unit, production costs at 37% of sales price, annual fixed costs for production at $200,000. The company tax rate is 38%. What is the annual operating cash flow of the new GPS system? Should Grady Precision Measurement Tools add the GPS system to its set of products? The initial investment is $1,320,000 for manufacturing equipment, which will be depreciated over six years (straight line) and will be sold at the end of five years for $380,000. The cost of capital is 12%. What is the annual operating cash flow of the new GPS system? $ (Round to the nearest dollar.)
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ces We are evaluating a project that costs $2,160,000, has a 8-year life, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 90,900 units per year. Price per unit is $38.91, variable cost per unit is $24.00, and fixed costs are $863,000 per year. The tax rate is 21 percent and we require a return of 11 percent on this project. Suppose the projections given for price, quantity, variable costs, and fixed costs are all accurate to within ±10 percent. Calculate the best-case and worst-case NPV figures. Note: A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16. Best-case NPV Worst-case NPV
ss
You are considering the following project. What is the NPV of the project? WACC of the project: 0.10 Revenue growth rate: 0.05 Tax rate: 0.40 Revenue for year 1: 13,000 Fixed costs for year 1: 3,000 variable costs (% of revenue): 0.30 project life: 3 years Economic life of equipment: 3 years Cost of equipment: 20,000 Salvage value of equipment: 4,000 Initial investment in net working capital: 2,000
Two altemnative machines will produce the same product, but one is capable of higher-quality work, which can be expected to return greater revenue. The following are relevant data. Determine which is the better alternative, assuming repeatability and using SL depreciation, an income-tax rate of 25%, and an after-tax MARR of 10%. Capital investment Life Machine A $20,000 12 years $3,500 Calculate the AW value for the Machine A. AWA (10%) = $(Round to the nearest dollar.) Terminal BV (and MV) Annual receipts Annual expenses Click the icon to view the interest and annuity table for discrete compounding when the MARR is 10% per year. Machine B $34,000 9 years $2,000 $144,000 $142,000 $190,000 $163,000
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