Based on market values, Gubler's Gym has an equity multiplier of 168 times. Shareholders require a return of 11.79 percent on the company's stock and a pretaxreturn of 5.06 percent on the company's debt. The company is evaluating a new project that has the same risk as the company itself. The project will generateannual aftertax cash flows of $321.000 per year for 9 years. The tax rate is 21 percent. What is the most the company would be willing to spend today on theproject?Multiple Choice$1,802.338$1.864,487$1.953,295

Maximum amount = 1-1/Equity multiplier * Pretax return * (1-Tax rate)+1/Equity multiplier * require…

Answered: cent on the company's debt. The company…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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The Melbo Foundation is contemplating the purchase of new equipment, which may potentially increase revenues by 25%. Currently, sales are R850,000 per year and cost of sales are 55% of sales. The equipment is expected to last for 5 years with no residual value (tax allowance granted is at 20% per year). The capex/ cost of equipment R257 500. The corporate tax rate is 28%. Calculate the estimated annual tax payment increase/decrease? R2,065 decrease R12,355 increase R12,075 decrease R2,625 increase
A construction company borrowed money at 10% per year interest to purchase new heavy equipmentneeded for the company’s various projects. If the company got the loan 2 years ago and paid it offwith a single payment of P25,000,000, what was the principal amount of the loan?
A project’s annual revenues will be $50,000 the first year and will decrease by $1500 per year over its 20-year life. If the firm’s interest rate is 12%, what is the project’s present worth? (a) $305,998 (b) $373,450 (c) $384,654 (d) $440,902.
Maldonado Steel invested in a new project that has an internal rate of return (IRR) of 9%. They expect the project to have annual cash flows of $52,000 for six years. What were the capital expenditures for this project (the PV of an annuity for 6 periods at 9% = 4.48592)? $261,713.40 $233,267.84 $202,261.80 $226,473.52
The XYZ Corporation expects to have sales of $15 million this year. Costs other than depreciation are expected to be 80% of sales, and depreciation is expected to amount to $1 million. XYZ is using $5 million debt at 10%. All sales revenues will be collected in cash, and costs other than depreciation must be paid for during the year. XYZ's federalolus - state tax rate is 30%. What is XYZ's expected cash flow from operations? (Assume no other changes occurred.)
You recently purchased an office building for $1,950,000 using the following loan terms: 70% LTV, 20-year amortization, 6.25% interest and monthly compounding. Assuming a net operating income of $150,000 in Year 1 and income taxes equal to $11,000, what is the expected ATCF from Operations in Year 1?
113.
A company has had record profits and decided to use some of the profits to pay for manufacturing improvements. If the company can invest $1,600,000.00 in an a annuity will that will make payments at the beginning of every six months for 4 years. If the annuity pays 5.6%, compounded semi-annual. What is the size of payments that the company can expect?The payment amount will be $. (Round to 2 decimal places.)
The company buys an asset that costs $11,200 and returns net cash flow of $160 per month for 3 years, followed by $270 per month for 3 additional years. The company financing rate is 10.9% compounded monthly. Find the asset's annualized internal rate of return and net present value. O The IRR and NPV equal 16.69% and $1,860.86 O The IRR and NPV equal 15.69% and $1,960.86 O The IRR and NPV equal 17.69% and $2,060.86 O The IRR and NPV equal 19.69% and $2,160.86
5. The original investment in a project was $66,350. The project has a life of ten years and the company requires a 10% rate of return on all investments. The annual net income was $16,592.1. $ 7,930 was the depreciation expense. What is the project's profitability index rounded to two decimal places?

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cent on the company's debt. The company is evaluating a new project that has t sh flows of $321,000 per year for 9 years. The tax rate is 21 percent. What is the ce 1802.338