Shinoda Manufacturing, Incorporated, has been considering the purchase of a newmanufacturing facility for $460,000. The facility is to be fully depreciated on a straight-line basis over seven years. It is expected to have no resale value at that time. Operatingrevenues from the facility are expected to be $370,000, in nominal terms, at the end ofthe first year. The revenues are expected to increase at the inflation rate of 5 percent.Production costs at the end of the first year will be $215,000, in nominal terms, and theyare expected to increase at 6 percent per year. The real discount rate is 8 percent. Thecorporate tax rate is 22 percent. Calculate the NPV of the project. (Do not roundintermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)NPV

A financial term called net present value (NPV) is used to assess how profitable a project or…

Answered: Shinoda Manufacturing, Incorporated,…

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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Bing Enterprises, Inc., has been considering the purchase of a new manufacturing facility for $277,000. The facility is to be fully depreciated on a straight-line basis over seven years. It is expected to have no resale value after the seven years. Operating revenues from the facility are expected to be $112,000, in nominal terms, at the end of the first year. The revenues are expected to increase at the inflation rate of 3 percent. Production costs at the end of the first year will be $37,000, in nominal terms, and they are expected to increase at 4 percent per year. The real discount rate is 6 percent. The corporate tax rate is 22 percent. Calculate the NPV of the project. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) NPV
Slapshot company issued $200,000, 10-year mortgage bonds to X Company at Par value. The bonds bear a contract rate of 12% and interest is paid semi-annually on January 1 and July 1. The market rate of interest is 11%. Calculate the original issue price of bonds for X Company. (Use present value factors to 6 decimal places, round your intermediate calculations to 2 decimal places and round your final answer to the nearest dollar.) a. $211,950 b. $200,000 c. $143,404 с. d. $200,545
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A company is considering a new 6-year project that will have annual sales of $234,000 and costs of $146,000. The project will require fixed assets of $265,000, which will be depreciated on a 5-year MACRS schedule. The annual depreciation percentages are 20.00 percent, 32.00 percent, 19.20 percent, 11.52 percent, 11.52 percent, and 5.76 percent, respectively. The company has a tax rate of 34 percent. What is the operating cash flow for Year 2? a. 68460 b. 86912 c. 58752 d. 73097 e. 75379
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