Q2. Suppose you are considering the following project with most-likely values:• Project life = 6 yearsRequired investment= $1,000,000• Salvage value = 80,000• Depreciation method = 5-year MACRS• Sales volume = 65,000 units annually• Price per unit = $60• Variable cost per unit - $40• Fixed annual cost = $532,000Tax rate = 35%• MARR = 20%(a) Compute the NPW for the most likely case showing all computations.(b) If you were told that the unit price, anmual sales volume, unit variable costs, and fixedcosts are all accurate to within +15%, what would be the NPW in the best-case and inthe worst case?

The current total worth of a future stream of payments is calculated using net present value, or…

Q2. Suppose you are considering the following project with most-likely values: • Project life = 6 years Required investment = 81,000,000 • Salvage value = s80,000 • Depreciation method = 5-year MACRS • Sales volume - 65,000 units annually • Price per unit = $60 • Variable cost per unit = $40 • Fised annual cost = $532,000 • Tax rate = 35% • MARR = 20% (a) Compute the NPW for the most likely case showing all computations. (b) If you were told that the unit price, annual sales volume, unit variable costs, and fixed costs are all accurate to within +15%, what would be the NPW in the best-case and in the worst case?

Q2. Suppose you are considering the following project with most-likely values: • Project life = 6 years Required investment = 81,000,000 • Salvage value = s80,000 • Depreciation method = 5-year MACRS • Sales volume - 65,000 units annually • Price per unit = $60 • Variable cost per unit = $40 • Fised annual cost = $532,000 • Tax rate = 35% • MARR = 20% (a) Compute the NPW for the most likely case showing all computations. (b) If you were told that the unit price, annual sales volume, unit variable costs, and fixed costs are all accurate to within +15%, what would be the NPW in the best-case and in the worst case?

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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You are analyzing a project and have developed the following estimates. The depreciation is $47,900 a year and the tax rate is 21 percent. What is the worst-case operating cash flow? Unit sales Sales price per unit Variable cost per unit Fixed costs -$2,545 $11,145 $88,855 $27,556 O $63,937 Base-Case Lower Bound Upper Bound 9,800 12,800 $34 $24 $ 9,200 11,300 $ 39 $25 $ 9,700 $44 $26 $ 10,200
Using incremental rate of return, consider the 3 alternatives below and a Minimum Attractive Rate of Return of 7 %, which alternative is preferred? Each have a useful life of 20 years and no Salvage value. A В C Initial $55,000 $27,000 $20,000 Investment Annual $5,600 $2,700 $2,200 income 8% 7.75% 9.06% Alt A Alt B Alt C
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3. Consider a three-year project with the following information: initial fixed asset investment = $698,000; straight-line depreciation to zero over the four-year life; zero salvage value; price = $34.15; variable costs = $22.60; fixed costs = $210,500; quantity sold = 96,500 units; tax rate = 40 percent. Required: What is the OCF at the base-case quantity sold? OCF What is the OCF at 97,500 units sold? OCF How sensitive is OCF to changes in quantity sold? AOCF/AQ $ $
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hi, could u explain how to solve plan B thx
3. Consider a project with an initial investment of $60,000, a 8 year useful life (and study period), and a $9,000 salvage value. You expect an annual net revenue of $14,000 (before tax), a MARR before tax of 15%, and an effective tax rate of 35%. The capital equipment is to be depreciated using MACRS ADS and a 7 year class life, Using after-tax cash flow analysis, determine if this is a good investment.
21. Consider a project that costs $250 now and is expected to generate $98 in net revenues at the end of each of the next three years. If the MARR is 5%, the future worth of this project is __________. A. $18.24 B. $19.54 C. $22.33 D. $18.29 23. Machine X has an initial cost of $12,000 and annual maintenance of $700 per year. It has a useful life of four years and no salvage value at the end of that time. Machine Y costs $22,000 initially and has no maintenance costs during the first year. Maintenance is $200 at the end of the second year and increases by $200 per year thereafter. Machine Y has a useful life of eight years and an anticipated salvage value of $5,000 at the end of its useful life. If the MARR is 6%, what is the approximate Net Present Worth (NPW) of machine X? A. -$28,563 B. -$25,852 C. -$32,085 D. -$22,318
Given the following information, what is the financial break-even point? Initial investment = $250,000; variable cost = $95; fixed cost = $58,000; price = $130; life = 6 years; required return = 12%; SL depreciation; before-tax salvage value of assets = $28,000; initial net working capital investment = $35,000, and tax rate is 21%. Do It correctly I'll rate
Problem 4. Which project would you select on the basis of rate of return, assuming MARR =15%. Please use excel spreadsheet to answer.
You Answered Some particulars for a project are as follows. Initial Capital Cost in year 0 ($Mn) Follow-up 'one-off' cost in year 1 ($Mn) Annual Operating Cost ($Mn/yr) Annual Benefits ($Mn/yr) Correct Answers Project Closure Cost, at end of project life ($Mn) Useful Life (years) Interest/Discount rate (percent) 1000 300 10% of capital cost 400 2,391 (with margin: 5) 200 20 7 What is the Life Cycle Cost of the project - expressed in present value term? (your answer must be rounded off to the nearest million dollars, i.e., no decimal places)
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