Give answer the general accounting Consider a four-year project with the following information: initialfixed asset investment = $520,000; straight-line depreciation tozero over the four-year life; zero salvage value; price = $22; variablecosts = $12; fixed costs = $160,000; quantity sold = 82,000 units;tax rate = 32 percent.a. What is the degree of operating leverage at the given level ofoutput? (Do not round intermediate calculations. Round your answerto 4 decimal places.)b. What is the degree of operating leverage at the accounting break-even level of output? (Do not round intermediate calculations. Roundyour answer to 4 decimal places.)

Step 1: Define Fixed CostFixed cost is an expenditure which the company is entitled to pay…

Answered: Consider a four-year project with the…

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter11: Cash Flow Estimation And Risk Analysis

Section: Chapter Questions

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A project has fixed costs of $400 per year, depreciation charges of $400 a year, annual revenue of $3,600, and variable costs equal to two-thirds of revenues. a. If sales increase by 17%, what will be the percentage increase in pretax profits? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) b. What is the degree of operating leverage of this project? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
General Accounting Question Solution Please with calculation
Assume a project has estimated fixed costs of $61,200, variable costs per unit of $84.29, a selling price of $199, and an initial cost of $402,000 for fixed assets. Depreciation is straight-line to zero over the project’s 4-year life. The tax rate is 30 percent, and the discount rate is 12 percent. What is the financial breakeven point?
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
Am. 121.
ELK, Inc. has compiled this information for a proposed project: sales price = $89 ±3 percent; fixed costs = $21,800 ±1 percent; variable cost per unit = $42.90 ±3 percent; sales quantity = 1,500 units ±5 percent; tax rate = 34 percent; initial investment in fixed assets = $36,500; depreciation method = straight-line to a zero book value over the project's life; project life = 4 years; salvage value of fixed assets = $0; net working capital requirement = $4,800, which will be recouped at the end of the project; discount rate = 12 percent. What is the project's net present value for the pessimistic scenario?
You are analyzing a project and have developed the following estimates. The depreciation is $47,900 a year and the tax rate is 21 percent. What is the worst-case operating cash flow? Unit sales Sales price per unit Variable cost per unit Fixed costs -$2,545 $11,145 $88,855 $27,556 O $63,937 Base-Case Lower Bound Upper Bound 9,800 12,800 $34 $24 $ 9,200 11,300 $ 39 $25 $ 9,700 $44 $26 $ 10,200
A project with a life of 10 has an initial fixed asset investment of $25,620, an initial NWC investment of $2,440, and an annual OCF of −$39,040. The fixed asset is fully depreciated over the life of the project and has no salvage value. If the required return is 10 percent, what is the project's equivalent annual cost, or EAC? Show equations using excel.
Suppose the MARR is 10% with probability 0.25, 12% with probability 0.50, and 15% with probability 0.25; what is the probability that Alternative A is the most economic alternative? Two investment alternatives are being considered. Alternative A requires an initial investment of $15,000 in equipment; annual operating and maintenance costs are anticipated to be normally distributed, with a mean of $5,000 and a standard deviation of $500; the terminal salvage value at the end of the 8-year planning horizon is anticipated to be normally distributed, with a mean of $2,000 and a standard deviation of $800. Alternative B requires endof-year annual expenditures over the planning horizon. The annual expenditure will be normally distributed, with a mean of $8,000 and a standard deviation of $750. Using a MARR of 15%, what is the probability that Alternative A is the most economic alternative?
An investment has an installed cost of $537,800. The cash flows over the four-year life of the investment are projected to be $212,750, $229,350, $196,010, and $144,720, respectively. a. If the discount rate is zero, what is the NPV? (Do not round intermediate calculations.) b. If the discount rate is infinite, what is the NPV? (A negative answer should be indicated by a minus sign.) c. At what discount rate is the NPV just equal to zero? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) a. NPV b. NPV c. IRR %
a. Find the incremental NPV for the Increased investment. (Do not round intermediate calculations. Round your answer to the nearest whole dollar amount. Enter your answer in thousands.) b. At what level of sales will accounting profits be unchanged if the firm makes the new investment? Assume the equipment receives the same straight-line depreciation treatment as in the original example. (Hint: Focus on the project's incremental effects on fixed and variable costs.) (Do not round intermediate calculations. Round your answer to the nearest whole dollar amount. Enter your answer in thousands.) c. What is the NPV break-even point in total sales if the firm invests in the new equipment? (Negative value should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to the nearest whole dollar amount. Enter your answer in thousands.) d. If the Blooper project operates at accounting break-even, will net present value be positive or negative?
Roberts Company is considering an investment in equipment that is capable of producing more efficiently than the current technology. The outlay required is 2,293,200. The equipment is expected to last five years and will have no salvage value. The expected cash flows associated with the project are as follows: Required: 1. Compute the projects payback period. 2. Compute the projects accounting rate of return. 3. Compute the projects net present value, assuming a required rate of return of 10 percent. 4. Compute the projects internal rate of return.

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