Suppose a project financed via an issue of debt requires five annual interest payments of $8 million each year. If the tax rate is 21% and the cost of debt is 5%, what is the value of the interest rate tax shield?
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Suppose a project financed via an issue of debt requires five annual interest payments of $8 million each year. If the tax rate is 21% and the cost of debt is 5%, what is the value of the interest rate tax shield?
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- AnswerA project will cost $180,000. The after-tax future cash flows are expected to be $50,000 annually for 7 years. Based on this information, what is the project's DPB if the interest rate is 8%? An investment project costs $22,366 and has annual cash flows of $6,556 for six years. What is the discounted payback period if the discount rate is zero percent?The capital structure weights of Kala Ghoda is .55 and the tax rate is 39 percent. The cash flows of Kala Ghoda will be $1.55 million per year for 7 years and the cost of debt is 5.46 percent. What is the NPV if it's equity costs 11.17 percent and the project's cost is $7.5 million?
- Suppose you considering investing $33 to earn $5.9 every year for 9 years. If the annual interest rate is 4.8%, what is the payback of this project? Suppose you considering investing $22 to earn $4.0 every year for 7 years. If the annual interest rate is 3.4%, what is the payback of this project?What is the minimum number of years that an investment costing $500,000 must return $65,000 per year at a discount rate of 13% in order to be an acceptable investment?A project requires an initial investment of $6 million and will yield operating cash flows of $1.5 million per year for the next 10 years. At the end of 10 years, the project’s assets can be divested for $350,000. The marginal tax rate is 35%, and the CCA rate is 30%. If the required rate of return is 15%, what is the present value of the CCA tax shields? Select one: a. $1,329,042.73 b. $1,308,432.91 c. $1,288,508.90 d. $1,210,537.92 e. $1,049,551.30
- Your division is considering two investment projects, each of which requires an up-front expenditure of 25 million. You estimate that the cost of capital is 10% and that the investments will produce the following after-tax cash flows (in millions of dollars): a. What is the regular payback period for each of the projects? b. What is the discounted payback period for each of the projects? c. If the two projects are independent and the cost of capital is 10%, which project or projects should the firm undertake? d. If the two projects are mutually exclusive and the cost of capital is 5%, which project should the firm undertake? e. If the two projects are mutually exclusive and the cost of capital is 15%, which project should the firm undertake? f. What is the crossover rate? g. If the cost of capital is 10%, what is the modified IRR (MIRR) of each project?Project A costs $5,000 and will generate annual after-tax net cash inflows of $1,800 for five years. What is the NPV using 8% as the discount rate?What is the internal rate of return (IRR) of a project that costs $20,070 if it is expected to generate $8,500 per year for three years?
- Assume that it costs $1,000 to start a project. If the project will give $400 profit in the first year, $500 in the second year and $300 in the third year. find the payback period. Now assume that the interest rate is 10%, find the net present value (NPV) and the profitability index (PI) for this projectCalculate the Net present value to determine is the company should invest in the following projects.Project A: Cost $272,000 and offers eight annual net cash inflows of $60,000. The company requires discount rate of 14% on the project. Project B: Cost $380,000 and offers nine annual after tax net cash inflows of $70,000. The company requires a hurdle rate of 12% on the project.BadRock Corp is evaluating a project with revenues will be $3.5 million and cash expenses will be $1.5 million while depreciation expense will be $400 000 per year, then what is the expected free cash flow per year from taking the project if the company's tax rate is 30 per cent?
