Consider the following information:Initial cost of equipment$108,000Sales tax and delivery costs$7,000Estimated life7 yearsSalvage value$11,000Annual cash inflows$31,000Estimated cost of capital10%Without considering the effect of income taxes, the net present value of the equipment is:O $39.921.

Step 1: Computation of net present value of equipment is as under: Formula table:Thus, NPV of the…

Answered: Consider the following information:…

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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A 5-year project is expected to generate revenues of $100000, variable costs of $24000, and fixed costs of $16500. The annual depreciation is $12000 and the tax rate is 35 percent. What is the annual operating cash flow? a. $43,275. b. $40,875. c. $43,000. d. $44,500. e. $42,875.
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What is the annual after-tax operating cash flow? Table 3 Initial Equipment Project Life Sales Variable Costs Fixed Costs Tax rate Cost of Capital Ending Book Value Sales Price at Year 3 Net Working Capital $24,700 O $13,300 $32,250 $19,300 $55,000 3 Years $50,000 $20,000 $10,000 35% 10% $1,000 $20,000 $10,000
1) $400,000 20,000 80,000 Machinery cost Working capital required Annual net cash receipts Required rate of return Life of the project 6 years Using net present value, would you make this investment? 10% Net Present Value ($60,320)
Given the following information: Price/Unit 225 VC/Unit 75 FC 500,000 Tax Rate 21% Rate 10% Machine Cost 3,000,000 Life 4 Depreciation Straight Line Using the FBE units, calculate the annual operating cash flows for the project. (Round to 2 decimals)
Spiritlight Ventures is considering the following investment: Investment $140,000 Annual revenues $ 96,000 Annual variable costs $ 32,000 Annual fixed out-of-pocket costs $ 20,000 Salvage value $ 12,000 Discount rate 12% Expected life of project 8 years Ignore income taxes. The present value of the annual cash flow (rounded) is a.$152,538. b.$136,822. c.$204,884. d.$218,592.
The Post Company is considering investing in two alternative projects: Investment Useful life (years) Estimated annual net cash inflows for useful life Residual value Depreciation method Required rate of return What is the accounting rate of return for Project 1? OA. 52.5% B. 20% OC. 30% OD. 7.5% Project 1 $200,000 4 $60,000 $20,000 Straight-line 15% Project 2 $260,000 8 $45,000 $16,000 Straight-line 10%
Based on the above after tax cash flows, what is the NPW of this project if the interest rate is 12%?
4. A project capitalized for ₱150,000 invested in depreciable assets will earn a uniform, annual income of ₱59, 547 in 10 years. The costs for operation and maintenance total ₱27,000a year, and taxes and insurance will cost 4% of the first cost each year. If the company expects its capital to earn12% before income taxes, is the investment worthwhile? Show by: Present worth method. Solve and show the soulution.
Below are two potential investment alternatives: Initial capital investment 180,000 Estimated useful life 3 years Estimated annual cash inflow each year 80,000 Desired rate of return 10% Assume straight-line depreciation in all computations, and ignore income taxes. The net-present value in this investment is _____. 18,948 (123,652) 75,000 186,518
calculate the net present value; Initial capital investment 180,000 Estimated useful life 3 years Estimated annual cash inflow each year 80,000 Desired rate of return 10% Assume straight-line depreciation in all computations, and ignore income taxes.

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