Initial investmentPretax salvage valueCost savings per year535,00030,000150,000Cost savings per year100,000Working capital reduction$60,000Annual depreciation charge$Aftertax salvage value6969107,00022,800Tax rateRequired return*Depreciation straight-lineover life24%11%5Output area:$NPV150,000cost savings$100,000YearCash flowYear0 $(475,000)0 $1139,68012139,6803139,6804139,6805102,4802345Accept/RejectRequired pretax cost savings:NPV w/o OCFRequired OCFOCF less dep. tax shieldCost savings69 69 69$(497,076.39)$134,494.11$108,814.11cost savingsCash flow(475,000)101,680101,680101,680101,68064,480

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Answered: Initial investment Pretax salvage value…

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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Amazon in OKC has just invested $250,000 in equipment having a negligible salvage value (SV 0) regardless of when the equipment if replaced. O&M costs equal $50,000 the first year and increase $10.000 per year. Based on a MARR of 10% What is the Capital Recovery (CR) cost for Year 4? A. $86,428 B. $60,317 C. $47,320 D. $39,569
What is the NPV of a project that costs $100,000, provides $23,000 in cash flows annually for six years, requires a $5,000 increase in net working capital (recaptured at the end), and depreciates the asset at 15 percent declining balance over six years and sold at zero salvage value? The discount rate is 14 percent. The tax rate is 40 percent $6,136.52 -$29639.22 -$23,460 -$13,283
Required information A potential investment has a cost of $395,000 and a useful life of 5 years. Annual cash sales from the investment are expected to be $255,338 and annual cash operating expenses are expected to be $100,588. The expected salvage value at the end of the investment's life is $50,000. The company has a before-tax discount rate of 17%. Required: Calculate the following. (Round dollar amounts to the nearest whole dollar and IRR to one decimal place (i.e. .055 = 5.5%). Enter negative amounts with a minus sign.) Annual PMT of the investment FV of the investment NPV of the investment IRR of the investment 0000 $
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A28
Estimated sales Sales Price per can Cost per can Estimated life Fixed costs Tax rate Initial equipment cost Initial equipment cost will be linearly depreciated over 4 year life with $10,000 salvage value Investment in NWC 50,000 cans $6.00 $3.00 4 years $10,000/year $100,050 $196,500 $116,000 $153,200 $90,000 Cost of capital What is the operating cash flow? $20,000 20% 10%
Maggie's Resorts expansion project to increase the number of bungalows on its property had the following information: Maggie's Resorts Initial Investment $7,954,000 Residual Value $1,046,000 Average annual cash inflow $1,257,900 Discount rate 10% Useful life of expansion in years 15
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Subject: accounting
No written by hand solution An asset with a first cost of $14,000 is depreciated using the Modified Accelerated Cost recovery System (MACRS) over a 5-year period. The cash flow before taxes (CFBT) is estimated at $10,000 for the first 4 years and $5000 thereafter as long as the asset is retained. The effective tax rate is 40%, and the money is worth 8% per year. In present worth dollars, how much of the cash flow generated by the asset over its recovery period is lost to taxes? The present worth (PW) of CFBT is determined to be $ . The present worth (PW) of CFAT is determined to be $ . The difference between the two present worth (PW) values is determined to be $ .
Required: If ABC requires has a cost of capital (discount rate) of 10%, How much is the equivalent annual cost of Model Y
Initial Equipment $65,000 Project Life 3 Years Sales $55,000 Variable Costs $25,000 Fixed Costs $ 10,000 Tax rate 26% Cost of Capital 10% Ending Book Value $10,000 Sales Price at Year 3 $5,000 Net Working Capital $10,000 CALCULATE THE INITIAL COSTS, CALCULATE THE OPERATING CASH FLOW, CALCULATE THE TERMINAL NON OPERATING CASH FLOW, CALCULATE THE NPV. please show your work and formulus for the answers

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