Financial account please solve the question Steele Insulators is analyzing a new type of insulation forinterior walls. The initial fixed asset requirement is $1.3 million,which would be depreciated straight-line to zero over the 12-year life of the project. Projected fixed costs are $314,800 andthe anticipated operating cash flow is $206,300. What is thedegree of operating leverage for this project?- 1.92- 1.66- 2.27- 2.53- 3.49

Step 1:Given, Initial fixed asset requirement: $1.3 millionProjected fixed costs:…

Answered: Steele Insulators is analyzing a new…

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter11: Cash Flow Estimation And Risk Analysis

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Genoa Company is considering a new investment whose data are shown below. The equipment would be depreciated on a straight-line basis over the project's 3-year life, would have a zero salvage value, and would require additional net operating working capital that would be recovered at the end of the project's life. Revenues and other operating costs are expected to be constant over the project's life. What is the project's NPV? WACC 14.57% Net investment in fixed assets (basis) $75,000 Required net operating working capital $33,000 Straight-line depreciation rate 33.333% Annual sales revenues $81,000 Annual operating costs (excl. depr.) $35,000 Tax rate 35.0% $3,018 $2,974 $3,009 $2,712 $2,823.05
Lehigh Products Company is considering the purchase of nen automated equipment. The project has an expected set present value of $250,000 with a standard deviation of $100,000. Question: 1. What is the probability that the project will have a net present value less than $50,000, assuming that net present value is normally distributed?
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You are considering the following project. What is the NPV of the project? WACC of the project: 0.10 Revenue growth rate: 0.05 Tax rate: 0.40 Revenue for year 1: 13,000 Fixed costs for year 1: 3,000 variable costs (% of revenue): 0.30 project life: 3 years Economic life of equipment: 3 years Cost of equipment: 20,000 Salvage value of equipment: 4,000 Initial investment in net working capital: 2,000
Magellen Industries is analyzing a new project. The data they have gathered to date is as follows: Sales quantity Sales price per unit Variable cost per unit Fixed cost Multiple Choice O Initial requirement for equipment: $120,000 Depreciation: Straight-line to zero over the four-year life of the project with no salvage value. Required rate of return: 15% Marginal tax rate: 35% What is the degree of operating leverage under the worst-case scenario? O O O .93 1.07 1.93 2.07 Lower Bound 9500 $9.75 $4.80 $15,000.00 1.63 Expected Value 10000 $10.00 $5.20 $18,000.00 Upper Bound 10500 $10.25 $5.60 $21,000.00
Suppose the MARR is 10% with probability 0.25, 12% with probability 0.50, and 15% with probability 0.25; what is the probability that Alternative A is the most economic alternative? Two investment alternatives are being considered. Alternative A requires an initial investment of $15,000 in equipment; annual operating and maintenance costs are anticipated to be normally distributed, with a mean of $5,000 and a standard deviation of $500; the terminal salvage value at the end of the 8-year planning horizon is anticipated to be normally distributed, with a mean of $2,000 and a standard deviation of $800. Alternative B requires endof-year annual expenditures over the planning horizon. The annual expenditure will be normally distributed, with a mean of $8,000 and a standard deviation of $750. Using a MARR of 15%, what is the probability that Alternative A is the most economic alternative?
Please answer as quickly as possible A project is currently under review. An initial investment of $87,000 would be necessary for equipment. The profit is expected to be $21,000 each year, over the 6 year project period. The salvage value of the equipment at the end of the project period is projected to be 17,000. Assume a MARR of 9%. Find an IRR for this project (exact value or smallish interval). (Be careful with +/- signs) (if your approach requires a starting point, use 15%)
Steele Insulators is analyzing a new type of insulation for interior walls. Management has compiled the following information to determine whether or not this new insulation should be manufactured. The insulation project has an initial fixed asset requirement of $1.3 million, which would be depreciated straight- line to zero over the 10-year life of the project. Projected total contribution margin is $1,121,000 and the anticipated annual EBIT is $222,000. Assume that the corporate tax rate (τ) is 35%. i) What is the degree of operating leverage for this project? ii) If sales fall by 10%, what is the impact on OCF?

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