A project with a life of 9 years is expected to provide annual sales of $ 410,000 and costs of $293,000. The project will require an investment in equipment of $715,000, which will be depreciated on a straight-line method over the life of the project. You feel that both sales and costs are accurate to +/- 10 percent. The tax rate is 21 percent. What is the annual operating cash flow for the best-case scenario? Multiple Choice $ 121,745 $93,361 $121,456 $164,650 $58,161

A project with a life of 9 years is expected to provide annual sales of $ 410,000 and costs of $293,000. The project will require an investment in equipment of $715,000, which will be depreciated on a straight-line method over the life of the project. You feel that both sales and costs are accurate to +/- 10 percent. The tax rate is 21 percent. What is the annual operating cash flow for the best-case scenario? Multiple Choice $ 121,745 $93,361 $121,456 $164,650 $58,161

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 5-year project is expected to generate annual sales of 8,400 units at a price of $71 per unit and a variable cost of $42 per unit. The equipment necessary for the project will cost $277,000 and will be depreciated on a straight-line basis over the life of the project. Fixed costs are $165,000 per year and the tax rate is 21 percent. How sensitive is the operating cash flow to a $1 change in the per unit sales price? Multiple Choice о O $4,914 $6,636 $3,598 $4,037 $3,159
A 7-year project is expected to provide annual sales of $221,000 with costs of $97,500. The equipment necessary for the project will cost $360,000 and will be depreciated on a straight-line method over the life of the project. You feel that both sales and costs are accurate to +/-15 percent. The tax rate is 35 percent. What is the annual operating cash flow for the worst-case scenario?
METL is evaluating a project projected to have a 7-year life. The initial investment of $4.2 million will be depreciated to zero using straight-line over the project life. The project is expected to create incremental sales of $2.4 million per year and incremental expenses of $1.4 million per year. What is the incremental after-tax operating cash flow (OCF) associated with this project if METL's tax rate is 32%? Enter answer in dollars, rounded to the nearest dollar.
A proposed new project has projected sales of $244,500, costs of $123,100, and depreciation of $15,100. The tax rate is 21%. What is the operating cash flow of this project?
Harper Electronics is considering investing in manufacturing equipment expected to cost $250,000. The equipment has an estimated useful life of four years and a salvage value of $25,000. It is expected to produce incremental cash revenues of $125,000 per year. Harper has an effective income tax rate of 30 percent and a desired rate of return of 10 percent. (PV of $1 and PVA of $1) (Use appropriate factor(s) from the tables provided.) Required a. Determine the net present value and the present value index of the investment, assuming that Harper uses straight-line depreciation for financial and income tax reporting. b. Determine the net present value and the present value index of the investment, assuming that Harper uses double-declining- balance depreciation for financial and income tax reporting. d. Determine the payback period and unadjusted rate of return (use average investment), assuming that Harper uses straight-line depreciation. e. Determine the payback period and unadjusted…
Peng Company is considering buying a machine that will yield income of $2,400 and net cash flow of $16,000 per year for three years. The machine costs $48,900 and has an estimated $8,100 salvage value. Compute the accounting rate of return for this investment. Numerator: Accounting Rate of Return Denominator: = Accounting Rate of Return Accounting rate of return
A 5-year project is expected to generate annual sales of 8,800 units at a price of $75 per unit and a variable cost of $46 per unit. The equipment necessary for the project will cost $309,000 and will be depreciated on a straight-line basis over the life of the project. Fixed costs are $185,000 per year and the tax rate is 21 percent. How sensitive is the operating cash flow to a $1 change in the per unit sales price? Multiple Choice $3,254 $3,629 $6,952 $4,752 $4,003
Suppose you are considering an investment project that requires $800,000, has a six-year life, and has a salvage value of $100,000. Sales volume is projected to be 65,000 units per year. Price per unit is $63, variable cost per unit is $42, and fixed costs are $532,000 per year. The depreciation method is a five-year MACRS. The tax rate is 35% and you expect a 20% return on this investment.(a) Determine the break-even sales volume.(b) Calculate the cash flows of the base case over six years and its NPW.(c) lf the sales price per unit increases to $400, what is the required break-even volume?(d) Suppose the projections given for price, sales volume, variable costs, and fixed costs are all accurale to wi thin ± 15%. What would be the NPW figures of the best-case and worst-case scenarios?
Bennett Company has a potential new project that is expected to generate annual revenues of $261,200, with variable costs of $143,600, and fixed costs of $61,000. To finance the new project, the company will need to issue new debt that will have an annual interest expense of $24,000. The annual depreciation is $25,000 and the tax rate is 21 percent. What is the annual operating cash flow? Multiple Choice $42,600 $127,600 $81,600 $178,616 $49,964
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.
A 7-year project is expected to provide annual sales of $221,000 with costs of $97,500. The equipment necessary for the project will cost $360,000 and will be depreciated on a straight-line method over the life of the project. You feel that both sales and costs are accurate to +/-15 percent. The tax rate is 21 percent. What is the annual operating cash flow for the worst-case scenario? es Multiple Choice $77,946 $44,504 0 $70,623 $129,329 $49.221
A company is considering purchasing a new piece of equipment that costs $100,000 and has an estimated useful life of 5 years. The equipment should increase annual cash receipts by $80,000 per year. Cash expenses to operate the equipment should be $25,000. The company uses straight-line depreciation. If the after-tax cost of capital is 10% and the tax rate is (Round your 30%, the net present value of this project based on the tables in the appendix is $ answer to the nearest whole number.) Need help? Review these concept resources. Read About the Concept

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