General Accounting Question:The Wet Corp. has an investmentproject that will reduce expenses by$30,000 per year for 3 years. Theproject's cost is $20,000. If theasset is part of the3-year MACRSfirst-yearcategory(33.33%depreciation) and thecompany's taxrate is 27%, what is the cash flow fromthe project in year 1?

Explanation: The cash flow from the project from Year 1 will be calculated as shown…

Answered: Question: The Wet Corp. has an…

Financial Management: Theory & Practice

16th Edition

ISBN:9781337909730

Author:Brigham

Publisher:Brigham

Chapter21: Dynamic Capital Structures And Corporate Valuation

Section: Chapter Questions

Problem 9P

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Mason, Inc., is considering the purchase of a patent that has a cost of $85000 and an estimated revenue producing lite of 4 years. Mason has a required rate of return that is 12% and a cost of capital of 11%. The patent is expected to generate the following amounts of annual income and cash flows: A. What is the NPV of the investment? B. What happens if the required rate of return increases?
Falkland, Inc., is considering the purchase of a patent that has a cost of $50,000 and an estimated revenue producing life of 4 years. Falkland has a cost of capital of 8%. The patent is expected to generate the following amounts of annual income and cash flows: A. What is the NPV of the investment? B. What happens if the required rate of return increases?
Your division is considering two investment projects, each of which requires an up-front expenditure of 15 million. You estimate that the investments will produce the following net cash flows: a. What are the two projects net present values, assuming the cost of capital is 5%? 10%? 15%? b. What are the two projects IRRs at these same costs of capital?
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Mario Kat, Inc plans a new project. Calculate its IRR. Assume that its initial after tax cost is $5,000,000 and it is expected to provide after-tax operating cash flows of ($1,800,000) in year 1, $2,900,000 in year 2, $2,700,000 in year 3 and $2,300,000 in year 4?
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In your first job with TBL Inc. your task is to consider a new project whose data are shown below. What is the project's Year 1 cash flow? The annual operating cash flows of the project can be calculated as follows: OCF = {[Sales - Operating Costs]*(1-Tax Rate)} + (Depreciation * Tax Rate) Sales revenues $225,250 Depreciation $78,847 Other operating costs $92,000 Tax rate 18%
Calculate the Net Present Value (NPV) of the following cash flow stream if the required rate is 12%: Year 0 1 2 3 4 5 Cash Flow (230,000) 60,000 60,000 60,000 60,000 60,000 Is this a good project for the business to accept? Explain why or why not.
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Gordo Corporation has a project with the following cash flows. If the project requires an initial investment (today) of $1,000, what is the net present value of the project if the required rate of return (discount rate) is 10.7 percent per year? Year Cash Flow 1 $1,560 2 $1,910 3 $2,185 4 $4,090

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