A new machine is expected to produce a MACRS deduction in three years of $50,000. If the firm has a 12% after-tax hurdle rate and is subject to a 30% income tax rate, what would be the correct discounted net cash flow to include in an acquisition analysis?
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- Falkland, Inc., is considering the purchase of a patent that has a cost of $50,000 and an estimated revenue producing life of 4 years. Falkland has a cost of capital of 8%. The patent is expected to generate the following amounts of annual income and cash flows: A. What is the NPV of the investment? B. What happens if the required rate of return increases?Given the initial investment in a factory processing equipment as Ghc500,037. Let the opportunity cost of capital for the industry be 10% p.a. Assuming that the equipment is capable of generating an after-tax returns of Ghc115,000 for the first 5 years and Ghc65000 for the 6th year and Ghc53400 for the 7th year. Find the Net Present Value (NPV) Determine the Internal Rate of Return Identify three ways in which the Net Present value is superior to the Internal Rate of return as investment criteriaYou are evaluating purchasing the rights to a project that will generate after tax expected operating cash flows of $91k at the end of each of the next five years, plus an additional $1,000k non-operating terminal period cash flow at the end of the fifth year. You can purchase this project for $531k. If your firm's cost of capital (aka required rate of return) is 14.3%, what is the NPV of this project? Note: All dollar values are given in units of $1k = $1000. Provide your answer in units of $1000, thus, $15000 = 15k and thus you should enter 15 for your answer.
- The Hamilton company wants to acquire another company at a cost of $10,000. The new company will add cash flows of $2,000 in year 1, $4,000 in year 2, $3,000 in year 3, $3,000 in year 4 and $4,000 in year 5. Assuming Hamilton has a discount rate of 10% and a payback requirement of 3.75 years, should the company do the investment according to simple payback and IRR?Given the initial investment in a factory processing equipment as Ghc500,037. Let the opportunity cost of capital for the industry be 10% p.a. Assuming that the equipment is capable of generating an after-tax returns of Ghc115,000 for the first 5 years and Ghc65000 for the 6th year and Ghc53400 for the 7th year. a. Find the Net Present Value (NPV) b. Determine the Internal Rate of Return c. Identify three ways in which the Net Present value is superior to the Internal Rate ofGTO Incorporated is considering an investment costing $210,720 that results in net cash flows of $30,000 annually for 10 years. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) (a) What is the internal rate of return of this investment? (b) The hurdle rate is 8.5%. Should the company invest in this project on the basis of internal rate of return? Answer is complete but not entirely correct. a. Internal rate of return 8 × % b. Should the company invest in this project on the basis of internal rate of return? No
- Given the initial investment in a factory processing equipment as Ghc500,037. Let the opportunity cost of capital for the industry be 10% p.a. Assuming that the equipment is capable of generating an after-tax returns of Ghc115,000 for the first 5 years and Ghc65000 for the 6 year and Ghe53400 for the 7th year. a. Find the Net Present Value (NPV) b. Detemine the Internal Rate of Return c. Identify three ways in which the Net Present value is superior to the Internal Rate of return as investment criteriaYour company is planning to purchase a new log splitter for is lawn and garden business. The new splitter has an initial investment of $180,000. It is expected to generate $25,000 of annual cash flows, provide incremental cash revenues of $150,000, and incur incremental cash expenses of $100,000 annually. What is the payback period and accounting rate of return (ARR)?GTO Inc. is considering an investment costing $214,170 that results in net cash flows of $30,000 annually for 11 years. (a) What is the internal rate of return of this investment? (b) The hurdle rate is 9.5%. Should the company invest in this project on the basis of internal rate of return?
- What is the simple payback period? What is the net present value of the investment? What is the modified internal rate of return for the investment?considering the purchase of a machine costing P700,000 with a useful life of 10 years. Annual cash cost savings are expected to be P200,000. Prot income tax rate is 25% and its cost of capital is 12%. Prot expects to use straight-line depreciation for tax purposes. Question: a. Compute the expected increase in annual net cash flow for this project. b. Compute the profitability index for the project.Rainwater Venture Capital would like to know whether an investment in a start-upcompany is worthwhile. The start-up company (Project X) will only trade for twoyears and has forecast operating profits of £30m and £35m over the next two years.It estimates £5m will be spent on additional fixed assets in Year 2. Depreciation willbe £2m per year and asset replacement will cost 50% of the annual depreciationcharge. The tax rate is 20%.REQUIREDa) Calculate the Free Cash Flow (FCF) for years 1 and 2 for the start-up. b) If the start-up would cost Rainwater £40m to buy (paid immediately), adviseRainwater on whether or not it should purchase the firm. You can assume thethe appropriate discount rate is 12%.
