123 Construction cost ($)4 Loan ($)A5Loan interest rate6 Loan term (yrs.)7 Hangar space (sq.ft.)8 Rent ($/sq.ft. per month)9 Rent inflator16171819Key Assumptions10 Operating Costs ($/yr.)11 Cost inflator12 Tax rate13 Discount rate14 Depreciation/year ($)1520211,250,000400,000BCash FlowsRent Incomeminus: Operating Costsminus: Interestminus: Depreciation= Taxable Incomeminus: Taxes6.0%524,0001.202.0%144,0002.0%21.0%7.0%10,000= Net Incomeminus: Principal= Net Operating Cash Flowminus: Cash Outlay at Startplus: Depreciation= Total Cash FlowsCStartDYear 1EYear 2FYear 3GYear 4HYear 5IYear 6JYear 7KYear 822232425262728NPVIRR2930 Note: Tax shields are the tax gains from expensing interest and depreciation. The formula is interest or depreciation expense times the tax rate31LYear 9MYear 10NTV0

Net Present Value=(Present Value of Cash Inflows-Present Value of Cash Outflows) IRR is a rate at…

Key Assumptions Construction cost ($) Loan ($) Loan interest rate Loan term (yrs.) Hangar space (sq.ft.) Rent ($/sq.ft. per month) Rent inflator Operating Costs ($/yr.) Cost inflator Tax rate Discount rate Depreciation/year ($) 1,250,000 400,000 Cash Flows Rent Income minus: Operating Costs minus: Interest minus: Depreciation = Taxable Income minus: Taxes 24,000 1.20 2.0% 144,000 6.0% 5 = - Total Cash Flows 2.0% 21.0% 7.0% 10,000 - Net Income minus: Principal = Net Operating Cash Flow minus: Cash Outlay at Start plus: Depreciation NPV IRR

Key Assumptions Construction cost ($) Loan ($) Loan interest rate Loan term (yrs.) Hangar space (sq.ft.) Rent ($/sq.ft. per month) Rent inflator Operating Costs ($/yr.) Cost inflator Tax rate Discount rate Depreciation/year ($) 1,250,000 400,000 Cash Flows Rent Income minus: Operating Costs minus: Interest minus: Depreciation = Taxable Income minus: Taxes 24,000 1.20 2.0% 144,000 6.0% 5 = - Total Cash Flows 2.0% 21.0% 7.0% 10,000 - Net Income minus: Principal = Net Operating Cash Flow minus: Cash Outlay at Start plus: Depreciation NPV IRR

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Q: Asset End of year Amount Appropriate Required Return E 1 $2,000 14% 2 $3,000 3…

A: The value of asset E can be found using the NPV function in excel. The discount rate is 14% The use…

Q: A project has the following net profit after tax set out below. The average book value of the assets…

A: ARR is one of the capital budgeting tools that can be used by an investor to evaluate a proposed…

Q: Calculate the total of CFADS over the lifetime of the project.

A: Cash Flow Available for Debt Service (CFADS) measures the cash generated by a project or investment…

Q: 2. An office building has the following investment characteristics: Year 1 NOI $2,100,000 $2,200,000…

A: Here, To Find: Purchase price =? Loan to value ratio =? Annual debt service =? Debt service…

Q: STEP 2: Compute the PV of the following years as follow with giving data: after tax lease payment…

A: The difference between the current value of cash inflows and outflow of cash over a period of time…

Q: Payback Period and Accounting Rate of Return: Equal Annual Operating Cash Flows with Disinvestment…

A: Payback Period The term "payback time" refers to the amount of years needed to recoup the initial…

Q: Required information The annual revenues associated with several large apartment complexes are $225,…

A: Cash flow is nonconventional when there is more than one change in the cash flow direction in a…

Q: Investment Production (millions of pounds Spread ($ per pound) Net revenues Production costs…

A: This question can be solved in excel as follows:

Q: Cash Flow Asset End of Year Amount Appropriate Required Return B 1 through Infinity $300 15% using…

Q: The data for an investment center is as follows: Current Assets Plant Assets January 1, 2022 $…

A: Current assets are assets in the form of cash or can be converted into cash within a year. Total…

Q: (b)A project has the following estimated data:Price RM54perunitVariablecostRM30 perunitFixed costs…

Q: a. What are the incremental earnings for this project for years 1 and 2? (Note: Assume any…

A: The value of cash available to a corporation after covering the costs of doing business is measured…

Q: You need to estimate the value of Laputa Aviation. You have the following forecasts (in millions of…

A: Tax rate = 30%Debt yield = 8%Equity cost = 12%Weight Debt = 40%Weight Equity = 60%ParticularsYear…

Q: Question: of A proposed new investment has projected sales $842,000. Variable costs are 57 percent…

A: Sales 842,000.00 Variable costs (479,940.00)Contribution margin 362,060.00 Fixed costs…

Q: Based on the above after tax cash flows, what is the NPW of this project if the interest rate is…

A: Net present value (NPV) is used to determine the present value of all future cash flows. Net present…

Q: Consider the following data for two Investments (assume MARR-minimum acceptable annual rate of…

A: Here is the detailed solution: A) Finding the values of 'A' and 'B':For Investment No. 1:Given:-…

Q: Project A Cost $364,000 and offeres 7 annual net cash inflows of $92,000 The company requires a…

A: Net present value is calculated as the sum of the present value of all the expected cash flows. Cost…

Q: A. 20Y5 Annual net cash flow is incorrect. B. Present value of annual net cash flow Less…

Q: If the property before tax cashflow (PBTCF) in a given year is $125,000, total debt service is…

A: The Equity after tax cash flow of the investor is that income after deducting all expenses and tax.

Q: Cash Flow Asset End of Year Amount Appropriate Required Return B 1 through Infinity $300 15%…

Q: Net Cash Flows and NPVs for different discount rate for projects S and L are given below Net…

A: NPVs @10% is 161.33. It is given in the question itself.

Q: What is the annual after-tax operating cash flow? Table 3 Initial Equipment Project Life Sales…

A: The first category of cash flow is the initial investment made, which is the initial cash…

Q: (Select the best answer.) a. O The expected return on plan assets for the year is $7,000 X.08 =$560

A: The expected return on plan assets is the anticipated income from the plan assets during the year.…

Q: t End of year Amount Appropriate Required Return A 1 $5,000 18% 2 $5,000 3…

A: PV function computes present value for the given interest rate (RATE), no. of periods (NPER) and…

Q: Minn is considering an investment proposal with the following cash flows: Initial…

A: Here, Initial investment-depreciable assets = $227,500 New cash inflows = $32,500…

Q: Required: 1. Compute Project Y's annual net cash flows.

A: Net cash flows can be described as all cash inflows net of cash outflows during a given period. Net…

Q: How do you calculate quarterly hour system?

A: It may not be true that employees won’t clock in the exact minute of the hour or even leave their…

Question

1
2
3 Construction cost ($)
4 Loan ($)
A
5
Loan interest rate
6 Loan term (yrs.)
7 Hangar space (sq.ft.)
8 Rent ($/sq.ft. per month)
9 Rent inflator
16
17
18
19
Key Assumptions
10 Operating Costs ($/yr.)
11 Cost inflator
12 Tax rate
13 Discount rate
14 Depreciation/year ($)
15
20
21
1,250,000
400,000
B
Cash Flows
Rent Income
minus: Operating Costs
minus: Interest
minus: Depreciation
= Taxable Income
minus: Taxes
6.0%
5
24,000
1.20
2.0%
144,000
2.0%
21.0%
7.0%
10,000
= Net Income
minus: Principal
= Net Operating Cash Flow
minus: Cash Outlay at Start
plus: Depreciation
= Total Cash Flows
C
Start
D
Year 1
E
Year 2
F
Year 3
G
Year 4
H
Year 5
I
Year 6
J
Year 7
K
Year 8
22
23
24
25
26
27
28
NPV
IRR
29
30 Note: Tax shields are the tax gains from expensing interest and depreciation. The formula is interest or depreciation expense times the tax rate
31
L
Year 9
M
Year 10
N
TV
0

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1: Net Present Value - Meanin

VIEW

Step 2: Calculation of NPV and IRR

VIEW

Step 3: Final Answer

VIEW

Solution

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 4 steps with 2 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions

Please show the solution.
Need help filling this project cash flow!! Please show answers in table format!
20. Complete the following table: Purchase price of product Landcruiser Down payment Amount financed Number of monthly payments amount of monthly payments total of monthly payments total finance charge $83,900 $50,000 72 $618
2. Calculating Project NPV The Fleming Company is considering a new investment. Financial projections for the investment are tabulated below. The corporate tax rate is 22 percent. Assume all sales revenue is received in cash, all operating costs and income taxes are paid in cash, and all cash flows occur at the end of the year. All net working capital is recovered at the end of the project. Investment Sales revenue Operating costs Depreciation Net working capital spending Year 0 $32,800 450 Year 1 Year 2 Year 3 Year 4 $14,200 2,100 8,200 175 $15,900 $15,700 2,100 2,100 8,200 8,200 250 275 $12,900 2,100 8,200 ? a. Compute the incremental net income of the investment for each year. b. Compute the incremental cash flows of the investment for each year. c. Suppose the appropriate discount rate is 12 percent. What is the NPV of the project?
Please do not give solution in image format thanku
omplete the following table: x Answer is complete but not entirely correct. Number of Amount of monthly Total of monthly Total finance Amount Purchase price of product Landcruiser Down financed monthly payments payments payments charge payment 538 52 x $ 36,584 X 75,900 48,000 27,900 24 68 %24 %24 Σ %24 %24
Asset End of year Amount Appropriate Required Return D 1 through 5 $1,500 12% 6 $8,500 Cash Flow By using cell references to the given data and the function PV, Calculate the value of asset D.