Elmdale Enterprises is deciding whether to expand its production facilities. Although long-term cash flows are difficultto estimate, management has projected the following cash flows for the first two years (in millions of dollars):a. What are the incremental earnings for this project for years 1 and 2? (Note: Assume any incremental cost of goodssold is included as part of operating expenses.)b. What are the free cash flows for this project for years 1 and 2?a. What are the incremental earnings for this project for years 1 and 2? (Note: Assume any incremental cost of goodssold is included as part of operating expenses.)Calculate the incremental earnings of this project below: (Round to one decimal place.)Incremental Earnings Forecast (millions)SalesOperating ExpensesDepreciationEBITIncome tax at 21%Unlevered Net IncomeYear 1Year 2$$SA$69$GA6769$$$6969$$SA

Step 1:Calculate the incremental earnings for the project for year 1 and 2 as follows:…

Answered: Elmdale Enterprises is deciding whether…

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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METL is evaluating a project projected to have a 7-year life. The initial investment of $4.2 million will be depreciated to zero using straight-line over the project life. The project is expected to create incremental sales of $2.4 million per year and incremental expenses of $1.4 million per year. What is the incremental after-tax operating cash flow (OCF) associated with this project if METL's tax rate is 32%? Enter answer in dollars, rounded to the nearest dollar.
Discuss the effect on Free Cash Flow in each of the following situations. Assume that all other things remain constant. d) Increase in time over which capitalized expenses are depreciated e) Now only 60% of NWC is recoverable when a project winds up
Wildhorse Industries management is planning to replace some existing machinery in its plant. The cost of the new equipment and the resulting cash flows are shown in the accompanying table. The firm uses an 18 percent discount rate for projects like this. Should management go ahead with the project? Year 0 1 2 3 4 5 Cash Flow -$3,485,400 871,710 896,700 1,104,400 1,340,360 1,450,600 What is the NPV of this project? (Enter negative amounts using negative sign e.g. -45.25. Do not round discount factors. Round other intermediate calculations and final answer to O decimal places, e.g. 1,525.) The NPV is $
The financial staff of Cairn Communications has identified the following information for the first year of the roll-out of its new proposed service: Projected sales $22 million Operating costs (not including depreciation) $11 million Depreciation $5 million Interest expense $3 million The company faces a 25% tax rate. What is the project's operating cash flow for the first year (t = 1)? Enter your answer in dollars. For example, an answer of $1.2 million should be entered as $1,200,000. Round your answer to the nearest dollar. $
Please provide correct solution for correct answer
The financial staff of Cairn Communications has identified the following information for the first year of the roll-out of its new proposed service: Projected sales $22 million Operating costs (not including depreciation) $9 million Depreciation $5 million Interest expense $3 million The company faces a 25% tax rate. What is the project's operating cash flow for the first year (t = 1)? Enter your answer in dollars. For example, an answer of $1.2 million should be entered as $1,200,000. Round your answer to the nearest dollar.
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please solve these pratice problems
Beyer Company is considering buying an asset for $350,000. It is expected to produce the following net cash flows. Compute the payback period for this investment. (Cumulative net cash outflows must be entered with a minus sign. Round your Payback Period answer to 2 decimal places.)
Brunette Company is contemplating investing in a new piece of manufacturing machinery. The amount to be invested is $180,000. The present value of the future cash flows generated by the project is $163,000. Should they invest in this project? Oa. yes, because the rate of return on the project is equal to the desired rate of return used to calculate the present value of the future cash flows Ob. no, because net present value is +$17,000 Oc. no, because the rate of return on the project is less than the desired rate of return used to calculate the present value of the future cash flows Od. yes, because the rate of return on the project exceeds the desired rate of return used to calculate the present value of the future cash flows
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You are thinking of making an investment in a new factory. The factory will generate revenues of $1,960,000 per year for as long as you maintain it. You expect that the maintenance costs will start at $90,160 per year and will increase 5% per year thereafter. Assume that all revenue and maintenance costs occur at the end of the year. You intend to run the factory as long as it continues to make a positive cash flow (as long as the cash generated by the plant exceeds the maintenance costs). The factory can be built and become operational immediately and the interest rate is 6% per year. a. What is the present value of the revenues? - b. What is the present value of the maintenance costs? c. If the plant costs $19,600,000 to build, should you invest in the factory? EIER

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