evenues -Cost of Goods Sold -Depreciation EBIT - Taxes (20%) Unlevered net income Depreciation -Additions to Net Working Capital -Capital Expenditures Free Cash Flow 475,000 475,000 -155,000 -155,000 - 95,000 -95,000 - 300,000 225,000 - 45,000 225,000 - 45,000 475,000 - 155,000 - 95,000 225,000 -45,000 180,000 180,000 95,000 95,000 - 20,000 - 20,000 255,000 255,000 isby Rides, a livery car company, is considering buying some new luxury cars. After exte p with the above estimates of free cash flow from this project. Visby learns that a compet imilar services, thus reducing Visby's sales. By how much could sales fall before the net ero, given that the cost of capital is 10%, and that cost of goods sold is 45% of revenue 180,000 95,000 - 20,000 255,000

evenues -Cost of Goods Sold -Depreciation EBIT - Taxes (20%) Unlevered net income Depreciation -Additions to Net Working Capital -Capital Expenditures Free Cash Flow 475,000 475,000 -155,000 -155,000 - 95,000 -95,000 - 300,000 225,000 - 45,000 225,000 - 45,000 475,000 - 155,000 - 95,000 225,000 -45,000 180,000 180,000 95,000 95,000 - 20,000 - 20,000 255,000 255,000 isby Rides, a livery car company, is considering buying some new luxury cars. After exte p with the above estimates of free cash flow from this project. Visby learns that a compet imilar services, thus reducing Visby's sales. By how much could sales fall before the net ero, given that the cost of capital is 10%, and that cost of goods sold is 45% of revenue 180,000 95,000 - 20,000 255,000

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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. Net Cash Flows and NPVs for different discount rate for projects S and L are given below Net Cash Flows ($) Discount Rate (%) NPVS NPVL Year (t) Project S Project L 0% $800 $1100 0 $(3000) $(3000) 5 554.32 1 1500 400 10 161.33 2 1200 900 15 (90.74) (259.24) 3 800 1300 20 (309.03) (565.97) 4 300 1500 h) If projects are independent (not mutually exclusive), which project(s) would you accept? i) at 5% ii) at 15%
$1,563,741 Sales $135,601 Operating Income Total Assets (investment) $565,923 Target Rate of Return (Cost of 11% Capital) What is return on investment? Input your answer to 1 decimal place. For example if you calculate.1892 enter 18.9.
Clearcast Communications Inc. is considering allocating a limited amount of capital investment funds among four proposals. The amount of proposed investment, estimated operating income, and net cash flow for each proposal are as follows: Operating Income Net Cash Flow Investment Year Proposal A: $450,000 $ 30,000 1 $120,000 2 30,000 120,000 3 20,000 110,000 4 10,000 100,000 (30,000) $ 60,000 $ 60,000 40,000 60,000 $510,000 $100,000 Proposal B: $200,000 1 80,000 3 20,000 60,000 4 (10,000) 30,000 (20.000) $ 90,000 20.000 $290,000 (Continued)
You are given the following information for Smashville, Incorporated. $249,000 $ 2,900 $ 394,000 $ 92,000 $ 7,400 $ 13,000 Cost of goods sold: Investment income: Net sales: Operating expense: Interest expense: Dividends: Tax rate: Current liabilities: Cash: Long-term debt: Other assets: Fixed assets: Other liabilities: Investments: Operating assets: 21% Gross margin Operating margin Return on assets Return on equity $ 22,000 $ 21,000 $9,000 $ 37,000 $ 139,000 $ 5,000 $ 13,000. $ 49,000 Calculate the gross margin, the operating margin, return on assets, and return on equity. Note: Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. % % % %
A firm has projected the following financials for a possible project: YEAR Sales Cost of Goods S&A Depreciation Investment in NWC Investment in Gross PPE 0 1,130.00 105,468.00 1 132,716.00 Submit 549.00 2 62,780.00 62,780.00 30,000.00 30,000.00 30,000.00 21,093.60 21,093.60 21,093.60 Answer format: Currency: Round to: 2 decimal places. 3 132,716.00 132,716.00 132,716.00 549.00 What is the NPV of the project? (Hint: Be careful about rounding the WACC here!) 4 62,780,00 62,780.00 62,780.00 30,000.00 549.00 21,093.60 549.00 5 132,716.00 The firm has a capital structure of 37.00% debt and 63.00% equity. The cost of debt is 9.00%, while the cost of equity is estimated at 15.00%. The tax rate facing the firm is 38.00%. (Assume that you can't recover the final NWC position in year 5. i.e. only consider the change in NWC for each year) 30,000.00 21,093.60 549.00
Assume a firm has EBAT of $590,000, and no amortization. It is in a 40 percent tax bracket. a. Compute its cash flow. $ 354,000 b. Assume it has $590,000 in amortization. Recompute its cash flow. $ 590,000 c. How large a cash flow benefit did the amortization provide? $T] Cash flow Cash flow Benefit in cash flow
METHODS THAT CONSIDER TIME VALUE OF MONEY Two investment proposals have been made and the following data thereon are given: Project ALPHA Project BETA Investment P123,417 P155,934 Depreciable assets included in the investment figure 60,000 72,000 Economic life 8 years 12 years Annual sales revenue P65,000 P78,000 Annual out-of-pocket operating cost 36,000 42,500 Income tax rate 35% Cost of capital 10% Determine which proposal is the better one based on: a. Internal rate of return b. Net present value c. Profitability index d. Discounted payback period
A company is considering expanding its production line. Cost for the the equipment for the expansion: Annual incease in sales: Number of years of the project: Annual operating costs other than depreciation: The company's tax rate: There is no change in Working Capital $200,000 $125,000 3 $50,000 35% The equipment will be depreciated on a 3 year straight line basis with 0 salvage value. At the end of 3 years the equipment disposed of at no cost or sale. Calcualte the Net Free Cash Flow for years 0 and 1 only as listed below. Do not use commas, decimals, or dollar signs. Enter negative numbers with a minus sign.
Company Express S. A. asks you to construct cash flows for following three (3) investment projects, containing following information:PROJECT 1a. Sales (in ThCh$):- Year 1: 90,000- Year 2: 55,000- Year 3: 75,000- Year 4: 190,000b. Cost of sales is estimated at 53% of sales.c. Depreciation for year is ThCh$ 15,000 per period (period 1 to 3). In year 4 there is a sale of machinery that results in a gain on sale of non-current assets of ThCh$ 9,800. Total depreciation for year 4 is ThCh$ 12,500.d. Administrative expenses are equivalent to 17% of sales.e. In period 0 there is an investment of ThCh$ 58,000.f. There is credit financing of ThCh$ 32,000 which is amortized in equal parts of ThCh$ 8,000 per period with a financial expense of ThCh$ 3,700 per period.g. There is an investment in working capital of ThCh$ 24,000 in period 0, which is recovered in period 4.h. In period 4 there is an investment in land of ThCh$ 40,000.i. Income tax rate is 17%. Calculate: cash flow per period. Please…
Problem 1: Consider the following cash flows and assume i = 10% for all analyses purposes: Project Cash Flows A D -$2,500 -$7,000 -$5,000 -$5,000 1 $650 -$2,500 -$2,000 -$500 2 $650 -$2,000 -$2,000 -$500 $650 -$1,500 -$2,000 $4,000 4 $600 -$1,500 -$2,000 $3,000 5 $600 -$1,500 -$2,000 $3,000 $600 -$1,500 -$2,000 $2,000 7 $300 -$2,000 $3,000 8 $300 a) Compute the project balances for Projects A and D, as a function of project year b) Compute the future worth values for Projects A and D at the end of service life. c) Suppose that Projects B and C are mutually exclusive. Assume also that the required service period is eight years and that the company is considering leasing comparable equipment that has an annual lease expense of $3,000 for the remaining years of the required service period for both projects. Which project is the better choice?
At the end of a capital project the equipment has been fully depreciated and is sold for $30,000. Working capital in the amount of $10,000 is also no longer needed for the project and converted to cash. The company's tax rate is 40%.What is the total terminal cash flow for this project? A.22,000 B.8,000 C.28,000 D.40,000
This Year’s Actual Results Next Year’s Initial Forecast Net sales $17,000,000 $20,060,000 Cost of goods sold 13,600,000 16,048,000 Gross profit $3,400,000 $4,012,000 Fixed operating costs except depreciation 850,000 850,000 Depreciation 340,000 401,200 Earnings before interest and taxes $2,210,000 $2,607,800 Interest 340,000 340,000 Earnings before taxes $1,870,000 $2,267,800 Taxes 748,000 907,120 Net income $1,122,000 1,360,680 Common dividends 605,880 605,880 Addition to retained earnings $516,120 $754,800 Earnings per share $0.22 $0.27 Dividends per share $0.12 $0.12 Number of common shares (millions) 5.00 5.00 Which of the following are assumptions made by the initial income statement forecast? Check all that apply. The forecasted increase in net sales is 18.00%. No additional external financing will be required. The assigned depreciation method has changed. The facility is not currently operating at full capacity.…

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