ntermediate calculations and round your answers to 2 decimal places.) Year 1 2 3 4 5 6 Cash Flow . Determine the weighted average cost of capital. (Do not round intermediate ounded to 2 decimal places.) Weighted average cost of capital %
ntermediate calculations and round your answers to 2 decimal places.) Year 1 2 3 4 5 6 Cash Flow . Determine the weighted average cost of capital. (Do not round intermediate ounded to 2 decimal places.) Weighted average cost of capital %
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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Transcribed Image Text:b. Determine the annual cash flow for each year. Be sure to include the recovered working capital in Year 6. (Do not round
intermediate calculations and round your answers to 2 decimal places.)
Year
1
2
3
4
5
6
Cash Flow
c. Determine the weighted average cost of capital. (Do not round intermediate calculations. Enter your answer as a percent
rounded to 2 decimal places.)
Weighted average cost of capital
%
d-1. Determine the net present value. (Use the WACC from part c rounded to 2 decimal places as a percent as the cost of capital
(e.g., 12.34%). Do not round any other intermediate calculations. Round your answer to 2 decimal places.)
Net present value
Transcribed Image Text:DataPoint Engineering is considering the purchase of a new piece of equipment for $310,000. It has an eight-year midpoint of its asset
depreciation range (ADR). It will require an additional initial investment of $130,000 in nondepreciable working capital. $52,000 of this
investment will be recovered after the sixth year and will provide additional cash flow for that year. Income before depreciation and
taxes for the next six are shown in the following table. Use Table 12–11, Table 12-12. Use Appendix B for an approximate answer but
calculate your final answer using the formula and financial calculator methods.
Year Amount
$206,000
174,000
144,000
129,000
102,000
92,000
123456
The tax rate is 25 percent. The cost of capital must be computed based on the following:
Debt
Preferred stock
Common equity (retained earnings)
Year
1
2
3
4
5
6
Kd
Kp
Ke
Depreciation
Base
a. Determine the annual depreciation schedule. (Do not round intermediate calculations. Round your depreciation base and annual
depreciation answers to the nearest whole dollar. Round your percentage depreciation answers to 3 decimal places.)
Cost
(aftertax)
8.30%
Percentage
Annual
Depreciation Depreciation
12.40
17.00
Weights
40%
10
50
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