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?You 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.Suppose you sell a fixed asset for $110,000 when its book value is $130,000. If your company's marginal tax rate is 21 percent, what will be the effect on cash flows of this sale (i.e., what wilIl be the after-tax cash flow of this sale)? (Enter your answer as a whole number.)
- 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 criteriaSuppose you sell a fixed asset for $109,000 when its book value is $129,000. If your company’s marginal tax rate is 21 percent, what will be the effect on cash flows of this sale (i.e., what will be the after-tax cash flow of this sale)? (Enter your answer as a whole number.)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?
- Suppose you sell a fixed asset for $212,000 when its book value is $112,000. If your company’s marginal tax rate is 30 percent, what will be the effect on cash flows of this sale (i.e., what will be the after-tax cash flow of this sale)?An equipment which can be purchase for P700,000 is expected to generate a net cash flow of P200,000 annually for five years which is the estimated service life of the equipment. Its salvage value at the end of the service life is estimated to be 5% of its purchased cost. a. What is the rate of return of the initial investment? b. What is the simple pay-back period? c. If the company's minimum attractive rate of return(MARR) is set at 15%, using NPW is this investment acceptable? d. What is the internal rate of return(IRR) of this machine? e. What is the external rate of return(ERR) at the 15% MARR?Study the information given below and determine, based on its Net Present Value (NPV), whether the investment should be favourably considered for acceptance or not. INFORMATIONLotto Ltd plans an investment in non-current assets costing R3 000000 . The non-current assets are expected to have a four-year life, with the following net profits anticipated:[Year 1,R350 000],[Year 2,R750 000],[Year 3,R200 000],[Year 4,R170 000]] Working capital amounting to R200 000 will be required at the start of the project. All the working capital will be recovered at the end of year 4 . The expected scrap value of the non-current assets is R400 000. The cost of capital is 12%. Ignore taxes.
- Bahwan Company is considering a new product line to supplement its range line. It is anticipated that the new product line will involve cash investments of $40,000 at time 0 and $50,000 in year 1. After-tax cash flows of $35,000 are expected in year 2, $45,000 in year 3, $35,000 in year 4. If the required rate of return is 16%, a) what is the net present value of the project? Is it acceptable? b) What is the project's payback period? Select one: a. None of the other three answers b. NPV= 8932, Acceptable, Pay back = 2 years c. NPV=-8932, Not acceptable, Pay back = 27.4 months d. NPV=-8932, Not Acceptable, Pay back = 2 yearsKern Co, is planning to invest in a two-year project that is expected to yield cash flows from operations, net of income taxes, of P50,000 in the first year and P80,000 in the second year. Kern requires an internal rate of return of 15%. The maximum that Kern should invest immediately is (Round off your factors into three decimal places) P103.980 P81.670 P130.000 P163,340Suppose that the date is 1 January 2022, and you are considering making an investment in General Electric (NYSE: GE). You are given the following information and assumptions to assist you with your valuation analysis: FY2022 revenue (i.e., for the 12-month period from 1 January 2022 to 31 December 2022) is forecast to be $80 billion, compared to actual FY2021 revenue of $75 billion. EBIT, depreciation & amortization (D&A) and capital expenditure dedicated solely for new investments/projects (i.e., growth capital expenditure) is expected to remain fixed (as a percentage of total revenues) at 15%, 5% and 3% respectively. The level of operating working capital needed for GE’s ordinary business operations historically as well as in the future is equal to 1% of total revenues. GE currently has $75 billion in debt outstanding, $40 billion in cash on hand and 9 billion shares outstanding. Assume that GE faces an effective corporate tax rate of 25%. Assume that GE’s long-term…
