Fun With Finance is considering a new 3-year expansion project that requires an initial fixed asset investment of $4.752 million. The fixed asset will be depreciated straight-line to zero over its 3-year tax life, after which time it will have a market value of $369,600. The project requires an initial investment in net working capital of $528,000. The project is estimated to generate $4,224,000 in annual sales, with costs of $1,689,600. The tax rate is 31 percent and the required return on the project is 12 percent. Required: (a) What is the project's year O net cash flow? (Click to select) ▼ (b)What is the project's year 1 net cash flow? (Click to select) (c) What is the project's year 2 net cash flow? (Click to select) v (d)What is the project's year 3 net cash flow? (Click to select) ✓ (e)What is the NPV? (Click to select) v

Fun With Finance is considering a new 3-year expansion project that requires an initial fixed asset investment of $4.752 million. The fixed asset will be depreciated straight-line to zero over its 3-year tax life, after which time it will have a market value of $369,600. The project requires an initial investment in net working capital of $528,000. The project is estimated to generate $4,224,000 in annual sales, with costs of $1,689,600. The tax rate is 31 percent and the required return on the project is 12 percent. Required: (a) What is the project's year O net cash flow? (Click to select) ▼ (b)What is the project's year 1 net cash flow? (Click to select) (c) What is the project's year 2 net cash flow? (Click to select) v (d)What is the project's year 3 net cash flow? (Click to select) ✓ (e)What is the NPV? (Click to select) v

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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World Trans. is considering two mutually exclusive projects. Both require an initial investment of $9,200 at t = 0. Project X has an expected life of 2 years with after-tax cash inflows of $7,000 and $7,800 at the end of Years 1 and 2, respectively. In addition, Project X can be repeated at the end of Year 2 with no changes in its cash flows. Project Y has an expected life of 4 years with after-tax cash inflows of $5,000 at the end of each of the next 4 years. Each project has a WACC of 8%. Using the replacement chain approach, what is the NPV of the most profitable project? Do not round the intermediate calculations and round the final answer to the nearest whole number. Group of answer choices $5,971 $5,528 $6,855 $7,371 $7,592
Esfandairi Enterprises is considering a new 3 - year expansion project that requires an initial fixed asset investment of $2.34 million. The fixed asset will be depreciated straight line to zero over its 3-year tax life, after which time it will be worthless. The project is estimated to generate $1, 740, 000 in annual sales, with costs of $650,000. The tax rate is 21 percent and the required return is 11 percent. What is the project's NPV?
Management expects a project to generate EBIT of $600,000 per year for 4 years.Depreciation expense is expected to be $225,000 per year and the corporation’s tax rateis 40%. The project will require an increase in net working capital of $50,000 in yearone and allow a decrease in net working capital of $25,000 in year four. The capitalexpenditure for the project will occur in year zero. What is the free cash flow for theproject in year one?
ed Esfandairi Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2,310,000. The fixed asset falls into the three-year MACRS class (MACRS schedule). The project is estimated to generate $1,770,000 in annual sales, with costs of $668,000. The project requires an initial investment in net working capital of $370,000, and the fixed asset will have a market value of $360,000 at the end of the project. a. If the tax rate is 22 percent, what is the project's Year 0 net cash flow? Year 1? Year 2? Year 3? Note: A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answers to two decimal places, e.g., 32.16. b. If the required return is 12 percent, what is the project's NPV? Note: Do not round intermediate calculations and round your answer to two decimal places, e.g., 32.16. 2,310,000.00 X a. Year 0 cash flow $ Year 1 cash flow $ 1,028,943 06 Year 2 cash flow $ 1,085,454.90 Year…
Your company is considering a project which will require the purchase of $635,000 in new equipment. The company expects to sell the equipment at the end of the project for 25% of its original cost, but some assets will remain in the CCA class. Annual sales from this project are estimated at $224,000. Initial net working capital equal to 28.00% of sales will be required. All of the net working capital will be recovered at the end of the project. The firm requires an 8.00% return on similar investments. The tax rate is 35%, and the project life is 5 years. There are no other operating expenses. Assume the present value of the CCA tax shield is $102,000. What is the project's NPV? Options $126,121 $129,530 $132,939 $136,347 $139,756
Mulroney Corp. is considering two mutually exclusive projects. Both require an initial investment of $11,300 at t = 0. Project X has an expected life of 2 years with after-tax cash inflows of $6,600 and $7,600 at the end of Years 1 and 2, respectively. In addition, Project X can be repeated at the end of Year 2 with no changes in its cash flows. Project Y has an expected life of 4 years with after-tax cash inflows of $4,200 at the end of each of the next 4 years. Each project has a WACC of 8%. Using the replacement chain approach, what is the NPV of the most profitable project? Do not round the intermediate calculations and round the final answer to the nearest whole number. a. $3,448 b. $3,302 c. $2,611 d. $2,953 e. $2,464
Quad Enterprises is considering a new 3-year expansion project that requires an initial fixed asset Investment of $1.512 million. The fixed asset will be depreciated straight-line to zero over its 3-year tax life, after which time it will be worthless. The project is estimated to generate $1,344,000 in annual sales, with costs of $537,600. If the tax rate is 22 percent, what is the OCF for this project? Multiple Choice $806,400 O $739,872 O $235,872 $702,878 $776,866
A 5-year project is expected to provide annual sales of $237,000 with costs of $99,500. The equipment necessary for the project will cost $380,000 and will be depreciated on a straight-line method over the life of the project. You feel that both sales and costs are accurate to +-15 percent. The tax rate is 21 percent. What is the annual operating cash flow for the worst-case scenario? Multiple Choice $143,185 $52,215 $105,590 $65,210 $84,710
please fix and given me the accurate answer
ABC, Inc. is considering a project that requires $21,000 in net working capital and $121,000 in fixed assets, which belong in a 30% CCA class. The fixed assets have a salvage value of 28,500 at the end of the 3 year project. The after-tax operating income of the project is $61,300 per year. The tax rate is 35% and the required rate of return is 16%. What is the NPV of this project? Multiple Choice $67,386 $48,933 $34,226 $21,887 $54,289
A 7-year project is expected to provide annual sales of $221,000 with costs of $97,500. The equipment necessary for the project will cost $360,000 and will be depreciated on a straight-line method over the life of the project. You feel that both sales and costs are accurate to +/-15 percent. The tax rate is 35 percent. What is the annual operating cash flow for the worst-case scenario?
A proposed expansion project is expected to increase sales by $74,300 and increase cash expenses by $46,900. The project will require $52,800 of fixed assets that will be depreciated using straight-line depreciation to a zero book value over the five-year life of the project. The store has a marginal tax rate of 23 percent. What is the operating cash flow of the project using the tax shield approach? Ignore bonus depreciation.

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