Ellie wants to report the before-tax IRR on a potential project to the upper management at her company. She calculated a 7.9% after tax IRR which compared in favour of the project to the after-tax MARR of 5.8%. If Ellie's company pays 51% corporate taxes, what numbers will she give upper management?
Q: You plan on opening a series of martial arts studios, based on a newly popular form of martial art.…
A: (a). Opportunity Cost = $23,000 This is the amount of next best alternative. If we do not start the…
Q: in Market X. You note that Market Y would also be a great place for a marketing campaign. The cost…
A: Both the plans are attractive but in order to see which plan is better one should know that which of…
Q: Linksys is considering the development of a wireless home networking appliance, called HomeNet, that…
A: Step 1: Identify the Opportunity CostLinksys has the option to rent out the warehouse space for…
Q: Jade is CEO of InvestCo, a financial advisory firm for the wealthy. Her firm’s WACC is 10.00%. Her…
A: Capital budgeting indicates the evaluation of the profitability of possible investments and projects…
Q: A firm decides to expand its operations and use more square footage in their main office. Currently,…
A: Opportunity cost refers to the potential benefits which cannot be recovered or which is forgone…
Q: Lou Lewis, the president of Lewisville Company, has asked you to give him an analysis of the best…
A: Evaluating alternatives: When a company is faced with the choice of two alternatives, both…
Q: The company you work for is considering building a new warehouse and manufacturing facility. The…
A: Capital budgeting is the process of analyzing and evaluating potential long-term investments or…
Q: 5. Maxine, a very recent FBM graduate, plans to open wholesale diary products enterprises so that…
A: Explanation : Break Even point is that point of sales on which company will recovered the total…
Q: Tom Scott is the owner, president, and primary salesperson for Scott Manufacturing. Because of this,…
A: The cash flows indicate the inflows and outflows of cash. Cash flows are critical to the company's…
Q: You are still debating about the two different computers. If you are paid $10.00/hour and your…
A: Payroll deductions are the amount of wages that are taken from an employee's total earnings in order…
Q: Mike Solid started a pizzeria in 1999. For this purpose he rented a building for $1,800 per month.…
A: Desired profit is that profit which is the addition of contribution that business will have to earn…
Q: You are an employee of University Consultants, Limited, and have been given the following…
A: “Since you have posted a question with multiple sub parts, we will provide the solution only to the…
Q: A company is considering the following three compensation plans for the salespeople listed in the…
A: Hi! Thank you for the question, As per the honor code, we are allowed to answer three sub-parts at a…
Q: Capital Cumulative Net Business Investment Investment Present Location Cost in $ Costs Value 1…
A: NPV of an investment proposal may be defined as the sum of the present values of all cash inflows…
Q: The owner of a bicycle repair shop forecasts revenues of $228,000 a year. Variable costs will be…
A: Income Statement: A financial statement that shows the profitability of the business in the given…
Q: Slow Roll Drum Co. is evaluating the extension of credit to a new group of customers. Although these…
A: When referring to investments that raise the overall outstanding aggregate invested amount under…
Q: If Condo wants to maximize its expected profit, what should it's bid be?
A: The main aim of every contractor and any business is to earn profit from the contract which has been…
Q: Due to the increasing energy costs in the US, Jackie Moora is anxious. The old machine her company…
A: The profitability of a proposed investment can be analyzed based on the present value technique. The…
Q: You are an employee of University Consultants, Limited, and have been given the following…
A: “Since you have posted a question with multiple sub parts, we will provide the solution only to the…
Q: With this information irfmind, Allison decides that next year's hurdle rate will be
A: Information Provided: Debt weight = 60% Equity weight = 40% Debt cost of capital = 4.25% Equity…
Q: Linksys is considering the development of a wireless home networking appliance, called HomeNet, that…
A: In finance when making capital budgeting decisions opportunity costs is an important concept.…
Q: 1. Compute the NPV for Campbell Manufacturing, assuming a discount rate of 12%. If required, round…
A: Net Present Value (NPV) is a financial tool used to measure the profitability of a proposed…
Q: )Explain the benefits and advantages to the company for each scenario.
A: 1) Contribution:Amount of profit that is generated by per unit to cover fixed cost.Higher the…
Q: Trent Incorporated needs an additional worker on a multiyear project. It could hire an employee for…
A: Particulars amount Cost if hire employee Annual salary $65000 (Payroll tax rate is 7.65%…
Q: A company wants to set up a new office in an area with a corporate tax rate as follows: 15% of the…
A: The topic of the question is related to corporate taxes for a company setting up a new office in an…
Q: Management would like to achieve a target profit after taxes of $300,000. The company’s income tax…
A: Profit before tax: It can be defined as the operating profits earned by a business before deducting…
Q: Deavyanne Johnston, the engineering manager at TZO Chemicals, is conducting an evaluation of…
A: Calculation of rate of return (ROR): Answer: ROR is 18.69%
Q: If the Resort Operating Center plans a targeted operating income of $210,000 and the tax rate is…
A: The Target net income is calculated as follows
Q: Hyundai is considering opening a plant in two neighboring states. Option 1: One state has a…
A: After State Tax Profit=Pretax profit-Pretax profit×Tax rate
Q: rate is 30% and the after-tax cash flow from sale of the property at the end of year 10 is expected…
A: The process through which a company evaluates possible big projects or investments is known as…
Q: On the internet and in the news you see many articles on non-profit companies and their contribution…
A: A non-profit organization is normally treated as a normal corporate corporation, with the added…
Q: Two fixtures are being considered for a particular job in a manufacturing firm. The pertinent data…
A: SLM is the straight line depreciation which is cost less salvage value divided by the useful life.…
Q: Compute the following for the above-referenced investment options: 1.Payback period/method (assume…
A: Payback period/method: The payback period is the time required for the initial investment to be…
Q: Andre is the CEO of soccer solutions in 2025, the firm will sell 6,324,500 whistles at a selling…
A: Given: Operating cash flows are free cash flows available for the company to use for a capital…
Q: You are the newly hired risk analyst for Smith Inc,, a food distribution company based in Nashville,…
A: Expected loss = 20% Expected Value of each loss = $7,500 Current Net Cost = $1,000,000 Employs =…
Q: Jim is planning to invest between $12,000 and $15,000 in two types of investment: investment 1…
A: “Hi There, thanks for posting the question. But as per Q&A guidelines, we must answer the first…
Q: Anita Brown is the manager of a wholesale food company. Her compensation, in part, is…
A: 1.When expenses are decreased, profitability of the company increases. Hence, when the estimate of…
Q: Tom Scott is the owner, president, and primary salesperson for Scott Manufacturing. Because of this,…
A: Operating cash inflows (OCF) can be referred to as the amount that will be received by an investor…
Q: The owner of a bicycle repair shop forecasts revenues of $168,000 a year. Variable costs will be…
A: The income statement is one of the financial statements that record the company’s income, expenses,…
Q: The president of Midnight Rambler wants to know if he should allow Jack Flash to have the scooters…
A: “Hey, since there are multiple questions posted, we will answer first question. If you want any…
Q: Lady Maria is thinking about starting a new business. The company would require $500,000 of assets,…
A: Return on Equity = Net Income / Shareholder's equity
Q: FIDELITY INVESTMENTS SUGGESTED ASSET ALLOCATIONS: CasShort-Tem Bonds Domestic Equities Foreign…
A: investment objectives depend on the age of person and laibilties he is going to face in near term…
Q: a. What are the cash flows to Tom under each scenario? (Do not round intermediate calculations and…
A: A capital structure is the combination of many funding sources used to finance its operations and…
Q: Option 1: One state has a corporate tax rate of 10 percent. If operated in this state, the plant is…
A: There are different taxation rates in different states that give the privilege to start a business…
Step by step
Solved in 2 steps
- Shelton Tax Services is considering investing in new software for their corporate tax business. The investment will require an outlay of $350,000 initially, and is expected to generate the following after-tax cash flows: Year 1, $60,000; Year 2, $80,000; Year 3, $105,000; Year 4, $120,000; Year 5, $145,000. Shelton uses a discount rate of 10%. What is the net present value of the proposed investment? Should this investment be accepted or rejected? Must show your computation steps. Use the appropriate tables in Appendix A to obtain the relevant present value factor and round up your final answer to the nearest dollar.In conducting an EVA analysis for year two for a newly introduced product line, Bethune, Inc., which manufactures pre-assembled blower packages and other water treatment components, determined the EVA to be $28,000. Bethune’s CEO knew that the gross income was $700,000, but he asked you to find out how much expense was associated with the new product line for year 2. The company uses an after-tax interest rate of 14% and a Te of 35%. The initial investment capital required for the new product was $550,000 and all equipment is 3-year MACRS depreciated.Kayla's Kayaks is also evaluating the extension of credit to a new customer, Ray's River Guides. Kayla estimates that this new customer would add $50,000 in additional credit sales, with 5% likely to be uncollectible. She estimates that she will incur $5,000 in additional collection expenses. Kayla's production and marketing costs represent 65% of her sales and the company is in the 30% tax bracket. She will not need any other asset buildup to service this new customer. Kayla's average collection period is 90 days and she has an 8% desired return. Should Kayla accept this new customer? Please provide her with the applicable calculations to back up your recommendation. Additionally, if you recommend that she accept this new customer, please explain the risks of doing so, specifically in terms of the percentage estimates she has given to you. If you recommend that she not accept this new customer, please give Kayla some ideas about what she could do to make this proposition more…
- Jade is CEO of InvestCo, a financial advisory firm for the wealthy. Her firm’s WACC is 9.00%. Her firm is investigating two projects, and they have asked you to determine which one to pursue. Project Y requires an initial investment of $132,000, while project Z requires an up-front investment of $122,000. Given the cashflows for each project listed below, answer the following questions. (important: make sure to place negative sign (-) in front of any negative cash flow.) A.) what is the NPV of the project that has the highest NPV? B.) what is the IRR of the project that has the highest IRR? C.) What is the Profitability Index of the Project that has the highest Profitability Index? Year Project Y Project Z 1 62,400 60,400 2 52,900 52,400 3 52,200 41,800 For NPV: write dollar amounts out to the penny with no dollar sign. Make sure you show negative sign (-) to indicate negative NPV. For IRR: interest…Ruby is looking at the results of a Capital Investment Appraisal. The report shows that, assuming a Cost of Capital of 10%, investing in a plant to manufacture a new clothing line would give a positive NPV and an IRR of 23%. Should the company buy the machine? NPV is positive and IRR is less than the Cost of Capital NPV is positive and IRR exceeds Cost of Capital. NPV does not provide enough information. IRR is higher than the Cost of CapitalYou are currently a worker earning $60,000 per year but are considering becoming an entrepreneur. You will not switch unless you earn an accounting profit that is on average at least as great as your current salary. You look into opening a small grocery store. Suppose that the store has annual costs of $150,000 for labor, $50,000 for rent, and $30,000 for equipment. There is a one-half probability that revenues will be $210,000 and a one-half probability that revenues will be $400,000. Instructions: Enter your answers as a whole number. If you are entering any negative numbers be sure to include a negative sign (−) in front of those numbers. Enter a loss as a negative number. a. In the low-revenue situation, what will your accounting profit or loss be? $ What will your accounting profit or loss be in the high-revenue situation? $ b. On average, how much do you expect your revenue to be? $ Your accounting profit? $ Your economic profit? $…
- 123 Each of the following scenarios is independent. Assume that all cash flows are after-tax cash flows. Campbell Manufacturing is considering the purchase of a new welding system. The cash benefits will be $480,000 per year. The system costs $1,550,000 and will last 10 years. Evee Cardenas is interested in investing in a women's specialty shop. The cost of the investment is $180,000. She estimates that the return from owning her own shop will be $55,000 per year. She estimates that the shop will have a useful life of 6 years. Barker Company calculated the NPV of a project and found it to be $63,900. The project's life was estimated to be 8 years. The required rate of return used for the NPV calculation was 10%. The project was expected to produce annual after-tax cash flows of $135,000. Required: 1. Compute the NPV for Campbell Manufacturing, assuming a discount rate of 12%. If required, round all present value calculations to the nearest dollar. Use the minus sign to indicate a…What number of visits is required to provide you with an after-tax profit of $100,000? Tax is 30%, fixed costs are $257,500 and contributions costs per visit $34. My problem is where and how in to plugg in the 30% tax. Could you show me your answer including your 30% tax conversion.You are an employee of University Consultants, Limited, and have been given the following assignment. You are to present an investment analysis of a small retail income-producing property for sale to a potential investor. The asking price for the property is $1,350,000; rents are estimated at $172,800 during the first year and are expected to grow at 2.5 percent per year thereafter. Vacancies and collection losses are expected to be 10 percent of rents. Operating expenses will be 35 percent of effective gross income. A fully amortizing 70 percent loan can be obtained at 7 percent interest for 30 years (total annual payments will be monthly payments × 12). The property is expected to appreciate in value at 3 percent per year and is expected to be owned for five years and then sold. Required: a. What is the first-year debt coverage ratio? b. What is the terminal capitalization rate? c. What is the investor’s expected before-tax internal rate of return on equity invested (BTIRR)? d.…
- Tom Scott is the owner, president, and primary salesperson for Scott Manufacturing. Because of this, the company's profits are driven by the amount of work Tom does. If he works 65 hours each week, the company's EBIT will be $620,000 per year; if he works a 75-hour week, the company's EBIT will be $765,000 per year. The company is currently worth $3.9 million. The company needs a cash infusion of $2 million and can issue equity or issue debt with an interest rate of 8 percent. Assume there are no corporate taxes. a. What are the cash flows to Tom under each scenario? (Do not round intermediate calculations and enter your answers in dollars, not millions of dollars, rounded to the nearest whole number, e.g., 1,234,567.) b. Under which form of financing is Tom likely to work harder?You are an employee of University Consultants, Limited, and have been given the following assignment. You are to present an investment analysis of a small retail income-producing property for sale to a potential investor. The asking price for the property is $1,400,000; rents are estimated at $179,200 during the first year and are expected to grow at 2.5 percent per year thereafter. Vacancies and collection losses are expected to be 10 percent of rents. Operating expenses will be 35 percent of effective gross income. A fully amortizing 70 percent loan can be obtained at 8 percent interest for 30 years (total annual payments will be monthly payments 12). The property is expected to appreciate in value at 3 percent per year and is expected to be owned for five years and then sold. Required: a. What is the first-year debt coverage ratio? b. What is the terminal capitalization rate? c. What is the investor's expected before-tax internal rate of return on equity invested (BTIRR)? d. What is…
