Problem 1 Intro A new project is expected to generate annual sales of $150,000 and annual costs of $142,500 (excluding depreciation). Annual depreciation attributable to the project is $60,000. The marginal tax rate is 34%. Part 1 What is NOPAT + depreciation in each year of operation? 0+ decimals Submit Attempt 1/2 for 10 pts.

Problem 1 Intro A new project is expected to generate annual sales of $150,000 and annual costs of $142,500 (excluding depreciation). Annual depreciation attributable to the project is $60,000. The marginal tax rate is 34%. Part 1 What is NOPAT + depreciation in each year of operation? 0+ decimals Submit Attempt 1/2 for 10 pts.

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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Problem 6-4 Calculating Project Cash Flow from Assets Esfandairi Enterprises is considering a new 3-year expansion project that requires an initial fixed asset investment of $2.29 million. The fixed asset will be depreciated straight-line to zero over its 3-year tax life. The project is estimated to generate $1,790,000 in annual sales, with costs of $700,000. The project requires an initial investment in net working capital of $410,000, and the fixed asset will have a market value of $420,000 at the end of the project. a. If the tax rate is 21 percent, what is the project's Year O net cash flow? Year 1? Year 2? Year 3? (Do not round intermediate calculations and enter your answers in dollars, not millions of dollars, e.g., 1,234,567. A negative answer should be indicated by a minus sign.) b. If the required return is 12 percent, what is the project's NPV? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to 2 decimal places,…
QUESTION 10 A project will produce operating cash flows of $57,000 a year for 3 years. During the life of the project, inventory will be lowered by $10,000 and accounts receivable will increase by $20,000. Accounts payable will decrease by $5,000. The project requires the purchase of equipment at an initial cost of $90,000. The equipment will be salvaged at the end of the project creating a $17,000 after-tax cash inflow. At the end of the project, net working capital will return to its normal level. What is the net present value of this project given a required return of 12%? $48,772.08 $54,681.35 $56,209.19 $42,908.17 $44,141.41
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Problem 6-6 NPV and Bonus Depreciation Esfandairi Enterprises is considering a new 3-year expansion project that requires an initial fixed asset investment of $2.29 million. The fixed asset qualifies for 100 percent bonus depreciation. The project is estimated to generate $1,790,000 in annual sales, with costs of $684,000. The project requires an initial investment in net working capital of $410,000, and the fixed asset will have a market value of $420,000 at the end of the project. a. If the tax rate is 21 percent, what is the project's Year O net cash flow? Year 1? Year 2? Year 3? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answers in dollars, not millions of dollars, e.g., 1,234,567.) b. If the required return is 12 percent, what is the project's NPV? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to two decimal places, e.g., 1,234,567.89.) a. Year 0 cash…
Problem 6-10 Calculating Salvage Value An asset used in a 4-year project falls in the 5-year MACRS class for tax purposes. The asset has an acquisition cost of $8,900,000 and will be sold for $2,440,000 at the end of the project. If the tax rate is 23 percent, what is the aftertax salvage value of the asset? (MACRS schedule) (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) Aftertax salvage value $ 2,232,149
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2 10 points & 01:46:23 eBook Hint Bartlett Car Wash Company is considering the purchase of a new facility. It would allow Bartlett to increase its net income by $91,438 per year. Other information about this proposed project follows: Initial investment Useful life Salvage value $ 427,280 8 years $ 52,000 Assume straight line depreciation method is used. Required: 1. Calculate the accounting rate of return for Bartlett. Note: Round your percentage answer to 2 decimal places. 2. Calculate the payback period for Bartlett. Note: Round your answer to 2 decimal places. 1. Accounting Rate of Return Print 2. Payback Period References % years
Q3 7a 7. XYZ Co. is evaluating whether to invest in a project with the following information: Project cost = $950,000 Project life = five years Projected number of units sold per year = 10,000 Projected price per unit = $200 Projected variable cost per unit = 150 Fixed costs per year = $150,000 Required rate of return = 15% Marginal tax rate = 35% Assume straight-line depreciation to zero over five years, and ignore the half-year rule for accounting for depreciation. a. Calculate the cash break-even sales quantity for this project.
Option 1 Option 2 Initial investment 13,000,000 18,000,000 Life of project Required of return 6 years 12% 8 years 10% Sales are expected to be 550,000; costs 395,000; yearly cash flow 2,100,000; depreciation cost per year 700,000. There is no increase in sales or prices in the first three years. Beginning from the fourth year, revenues and cost of sales will grow by 25%, 20% in the fifth year, 15% in the sixth year, and remain constant at 10% for the remaining years There are two recommended options. Meanwhile, our financial manager has analysed the investment by performing two discounted methods and one non-discounted cash flow method based on the information in the attached table. Nevertheless, we are still in a dilemma choosing between the options. We would be grateful if you could provide us with some advice regarding this matter. Q1: Identify which option needs to be chosen and state the reason why the company chose the option.
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Question 5 A machine that have the following cost is under consideration for a new manufacturing process. The interest rate is 6% compounded semiannually. First cost = $70,000 Semiannual operating cost = 6,000 Semiannual income = 18,000 Salvage value = 9,000 Life in years = 5 years a. PW = $29,059 b. PW = $39,059 O c. PW = -$39,059 d. PW = $19,059

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