Dog Up! Franks is looking at a new sausage system with an installed cost of $863,006. Thiscost will be depreciated straight-line to 68,640 over the project's 7-year life, at the end ofwhich the sausage system can be scrapped for $130,815. The sausage system will save thefirm $249,240 per year in pretax operating costs, and the system requires an initialinvestment in net working capital of $61,737. If the tax rate is 0.29 and the discount rate is0.1, what is the total cash flow in year 7? (Make sure you enter the number with theappropriate +/- sign)

Free cash flow is that amount which is earned by the investor from the project. It is the net amount…

Answered: Dog Up! Franks is looking at a new…

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 Food Company is considering a project proposal for a newly formulated food product, AA. The initial fixed capital investment is GHC 18,000,000 and the working capital is GHC 2,000,000. The plant can process 72,000 kg of food in an hour, and will operate 4,000 hours per year. The expected annual expenses (excluding depreciation costs) is GHC 6,000,000 per year. The plant is expected to have a service life of ten years. The depreciation is GHC 1,500, 000. The tax rate is 25%. If the required annual rate of return after tax (hurdle rate) is 18%, calculate the minimum amount the food company should charge per customer per kilogram of food product, AA. (A) using the return on initial investment method (B) using the NPV method How would the hurdle rate change if an inflation rate of 4% is considered? The hurdle rate of 18% did not include the inflation rate of 4%.
Dried Inc. is evaluating the feasibility of a construction project. Construction would require an initial payment of $320,000 today, $160,000 one year from now, and $45,000 two years from now. Net returns of $80,000 are expected every year and the project would be sold for $450,000 after 10 years. Compute the NPV and determine if the project is feasible if the cost of capital is 12%. please sove this sum asap
Wettway Sailboat Corporation is considering whether to launch its new Margo-class sailboat. The selling price will be $41,000 per boat. The variable costs will be about half that, or $20,000 per boat, and fixed costs will be $465,000 per year. The total investment needed to undertake the project is $3,100,000. This amount will be depreciated straight-line to zero over the 5-year life of the equipment. The salvage value is zero, and there are no working capital consequences. Wettway has a required return of 11 percent on new projects. FC + OCF-TCX D 1-TC P-v Use the above expression to find the cash, accounting, and financial break-even points for Wettway Sailboat. Assume a tax rate of 21 percent. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) Cash break-even Accounting break-even Financial break-even
You are considering a proposal to produce and market a new sluffing machine. The most likely outcomes for the project are as follows: Expected sales: 115,000 units per year Unit price: $220 Variable cost: $132 Fixed cost: $4,890,000 The project will last for 10 years and requires an initial investment of $16.70 million, which will be depreciated straight-line over the project life to a final value of zero. The firm's tax rate is 30%, and the required rate of return is 12%. However, you recognize that some of these estimates are subject to error. In one scenario a sharp rise in the dollar could cause sales to fall 30% below expectations for the life of the project and, if that happens, the unit price would probably be only $210. The good news is that fixed costs could be as low as $3,260,000, and variable costs would decline in proportion to sales. a. What is project NPV if all variables are as expected? Note: Do not round intermediate calculations. Enter your answer in thousands not in…
Management of Crane Home Furnishings is considering acquiring a new machine that can create customized window treatments. The equipment will cost $209,550 and will generate cash flows of $83,750 over each of the next six years. If the cost of capital is 11 percent, what is the MIRR on this project?
Cori's Meats is looking at a new sausage system with an installed cost of $505,000. This cost will be depreciated straight-line to zero over the project's five-year life, at the end of which the sausage system can be scrapped for $75,000. The sausage system will save the firm $185,000 per year in pretax operating costs, and the system requires an initial investment in net working capital of $34,000. If the tax rate is 25 percent and the discount rate is 8 percent, what is the NPV of this project? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) NPV $ 553,988.52
Managers of Central Embroidery have decided to purchase a new monogram machine and are considering two alternative machines. The first machine costs $100,000 and is expected to last five years. The second machine costs $160,000 and is expected to last eight years. Assume that the opportunity cost of capital is 8 percent. Which machine should Central Embroidery purchase?
Riguel Company is considering a long-term capital investment project in laser equipment. This will require an investment of $280,000, and it will have a useful life of 5 years. Annual net income is expected to be $16,000 a year. Depreciation is computed by the straight-line method with no salvage value. The company's cost of capital is 10%, and it desires a cash payback of 60% of a project's useful life or less. (Hint: Assume cash flows can be computed by adding back depreciation expense.) (Round all computations to two decimal places unless directed otherwise.) a. Compute the cash payback period for the project. b. Compute the net present value for the project. (Round to nearest dollar.) c. Compute the annual rate of return for the project. d. Should the project be accepted? Why or why not?
Kolby’s Korndogs is looking at a new sausage system with an installed cost of $680,000. The asset qualifies for 100 percent bonus depreciation and can be scrapped for $90,000 at the end of the project’s 5-year life. The sausage system will save the firm $193,000 per year in pretax operating costs, and the system requires an initial investment in net working capital of $45,000. If the tax rate is 25 percent and the discount rate is 9 percent, what is the NPV of this project? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
OptiLux is considering investing in an automated manufacturing system. The system requires an initial investment of $6.0 million, has a 20-year life, and will have zero salvage value. If the system is implemented, the company will save $740,000 per year in direct labor costs. The company requires a 10% return from its investments. (PV of $1, FV of $1, PVA of $1, and FVA of $1) Note: Use appropriate factor(s) from the tables provided. a. Compute the proposed investment's net present value. b. Using the answer from part a, is the investment's internal rate of return higher or lower than 10%? Hint: It is not necessary to compute IRR to answer this question. Complete this question by entering your answers in the tabs below. Required A Required B Compute the proposed investment's net present value. Net present value
Dog Up! Franks is looking at a new sausage system with an initial cost of $435,000 that will last for five years. The fixed asset will qualify for 100 percent bonus depreciation in the first year, at the end of which the sausage system can be scrapped for $49,000. The sausage system will save the firm $137,000 per year in pretax operating costs, and the system requires an initial investment in net working capital of $24,000. If the tax rate is 21 percent and the discount rate is 9 percent, what is the NPV of this project? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

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