"Orion S.A" is considering a new investment which will entail an immediate capital expenditure of €1,000,000, an increase in account receivables by €200,000, and an increase in accounts payable by €100,000. The investment will be depreciated on a straight-line basis over 5 years with no expected salvage value. The sales and operating expenses are expected to increase by €800,000 and €100,000 per year respectively, over the 5-year life of the project. The investment is to replace an existing one which is fully depreciated, but it can be sold for €250,000. "Orion S.A." is in the 20 percent tax bracket and the cost of capital is 5 percent. The net cash flow of the project for the 1st year will be: Select one: a. Inflow €650,000 b. Inflow €600,000 c. None of the proposed answers is correct

"Orion S.A" is considering a new investment which will entail an immediate capital expenditure of €1,000,000, an increase in account receivables by €200,000, and an increase in accounts payable by €100,000. The investment will be depreciated on a straight-line basis over 5 years with no expected salvage value. The sales and operating expenses are expected to increase by €800,000 and €100,000 per year respectively, over the 5-year life of the project. The investment is to replace an existing one which is fully depreciated, but it can be sold for €250,000. "Orion S.A." is in the 20 percent tax bracket and the cost of capital is 5 percent. The net cash flow of the project for the 1st year will be: Select one: a. Inflow €650,000 b. Inflow €600,000 c. None of the proposed answers is correct

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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XYZ is evaluating a project that would require the purchase of a piece of equipment for $440,000 today. During year 1, the project is expected to have relevant revenue of $786,000, relevant costs of $201,000, and relevant depreciation of $132,000. XYZ would need to borrow $440,000 today to pay for the equipment and would need to make an interest payment of $33,000 to the bank in 1 year. Relevant net income for the project in year 1 is expected to be $337,000. What is the tax rate expected to be in year 1? A rate equal to or greater than 21.96% but less than 26.61% A rate less than 21.96% or a rate greater than 46.34% A rate equal to or greater than 31.02% but less than 38.39% A rate equal to or greater than 38.39% but less than 46.34% A rate equal to or greater than 26.61% but less than 31.02%
The initial investment in machinery would be $8 million immediately and the project is expected to last for three years. Investment in machinery receives tax allowable depreciation of 25% per annum on a straight-line basis. Allowances are receivable one year in arrears. The machinery will be sold at the end of the project for $5 million, in year 3 prices. And the answer is in the picture. How to calculate the answer of Tax Allowable depreciation?
Acme Company is expanding and expects operating cash flows of $85,000 a year for 4 years as a result. This expansion requires $240,000 in new fixed assets. These assets will be worthless at the end of the project. In addition, the project requires a $15,000 investment in net working capital (assume NWC will be recovered at the end of the project). What is the net present value of this expansion project at a required rate of return of 15 percent? Question 1 options: $(3,375.49) $(3,638.02) $(3,750.54) $(3,563.01) $(3,825.55)
A project requires an initial investment in equipment and machinery of $10 million. The equipment is expected to have a 5-year lifetime with no salvage value and will be depreciated on a straight-line basis. The project is expected to generate revenues of $5.1 million each year for the 5 years and have operating expenses (not including depreciation) amounting to 1/3 of revenues. The tax rate is 40%. What is the net cash flow in year 1? Group of answer choices 3.40M 2.84M 0.84M 2.04M
A project with a life of 6 years is expected to provide annual sales of $260,000 and costs of $173,000. The project will require an investment in equipment of $490,000, which 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 best-case scenario?
A project with a life of 7 years is expected to provide annual sales of $270,000 and costs of $181,000. The project will require an investment in equipment of $505,000, which will be depreciated on a straight-line method over the life of the project. You feel that both sales and costs are accurate to +/-10 percent. The tax rate is 21 percent. What is the annual operating cash flow for the best-case scenario? Multiple Choice O O $80,460 $95,907 $82,497 $55,197 $121,089
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For this investment, an initial amount of $25,000 should be paid this year (t=0). As of next year (t=1), five equal payments of $20,000 should also be paid (i.e., from t=1 to t=5). Thus, the sum of the required investment expenditure over those periods is $125,000. How much is the sum of the present value of the required investment expenditure over those periods, assuming that the annual interest rate is 5%?
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