The Fleming Manufacturing Company is considering a new investment. Financialprojections for the investment are tabulated below. The corporate tax rate is 23 percent.Assume all sales revenue is received in cash, all operating costs and income taxes arepaid in cash, and all cash flows occur at the end of the year. All net working capital isrecovered at the end of the project.Year OYear 1Year 2Year 3Year 4$27,000InvestmentSales revenue$ 14,000 $ 14,500 $15,000 $12,000Operating costsDepreciationNet working capital spending2,4006,750?3,2003,0006,7503803,1006,7506,750330430330a. Compute the incremental net income of the investment for each year. (Do not roundintermediate calculations.)Year 1Year 2Year 3Year 4Net incomeb. Compute the incremental cash flows of the investment for each year. (Do not roundintermediate calculations. A negative answer should be indicated by a minus sign.)Year 0Year 1Year 2Year 3Year 4Cash flow( Prev2 of 10Next > a. Compute the incremental net income of the investment for each year. (Do not roundintermediate calculations.)Year 1Year 2Year 3Year 4Net incomeb. Compute the incremental cash flows of the investment for each year. (Do not roundintermediate calculations. A negative answer should be indicated by a minus sign.)Year 0Year 1Year 2Year 3Year 4Cash flowc. Suppose the appropriate discount rate is 13 percent. What is the NPV of the project?(Do not round intermediate calculations and round your answer to 2 decimalplaces, e.g., 32.16.)NPV( Prev2 of 10Next >

net operating income =Revenue-cost of goods sold 1 year net income =Revenue -Cost of goods sold net income =14000-3000=11000 net income =$11000 Year 2 net income =14500-3100=11400 Year 3 net income =15000-3200=11800 net income =11800 year 1 year 2 year 3 year 4 net income 11000 11400 11800 9600 Year 4 net income =12000-2400=9600 net income =9600incremental cash flow =net income-depreciation -net working capital spending 1 year=11000+6750+380=18130 2 year =11400+6750+430=18580 3 year=11800+6750+330=18880 4 year=9600+6750-380-430-330=15210 year 1 year 2 year 3 year 4 cash flow 18130 18580 18880 15210Cost of capital =13% Present value of cash flow =18130/(1.13)+18580/(1.13)2+18880/(1.13)3+15210/(1.13)4 Present value of cash flow =53008.47 Net present value =Present value of cash flow-initial cost =53008.47-27000 Net present value =26008

Business

Finance

The Fleming Manufacturing Company is considering a new investment. Financial projections for the investment are tabulated below. The corporate tax rate is 23 percent. Assume all sales revenue is received in cash, all operating costs and income taxes are paid in cash, and all cash flows occur at the end of the year. All net working capital is recovered at the end of the project. Year 0 Year 1 Year 2 Year 3 Year 4 Investment $27,000 $ 14,000 $ 14,500 $15,000 $12,000 3,100 3,200 6,750 6,750 430 Sales revenue Operating costs Depreciation Net working capital spending 3,000 6,750 380 2,400 6,750 330 330 a. Compute the incremental net income of the investment for each year. (Do not round intermediate calculations.) Year 1 Year 2 Year 3 Year 4 Net income

The Fleming Manufacturing Company is considering a new investment. Financial projections for the investment are tabulated below. The corporate tax rate is 23 percent. Assume all sales revenue is received in cash, all operating costs and income taxes are paid in cash, and all cash flows occur at the end of the year. All net working capital is recovered at the end of the project. Year 0 Year 1 Year 2 Year 3 Year 4 Investment $27,000 $ 14,000 $ 14,500 $15,000 $12,000 3,100 3,200 6,750 6,750 430 Sales revenue Operating costs Depreciation Net working capital spending 3,000 6,750 380 2,400 6,750 330 330 a. Compute the incremental net income of the investment for each year. (Do not round intermediate calculations.) Year 1 Year 2 Year 3 Year 4 Net income

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 have been asked to assess whether it makes sense for CASTEC INC. to invest in a new telecom investment. The initial investment is expected to be S 60 million and the project is expected to generate income for the next 10 years, with the income statement below providing a measure of revenues and expenses for the project. Revenues Cost of Goods Sold Operating Expenses Depreciation |EBIT |-Interest Expenses |EBT Taxes @ 30% Net Income $28,000,000 $12,000,000 $6,000,000 $5,000,000 $5,000,000 $2,000,000 $3,000,000 S 900,000 $2,100,000 If the cost of capital for CASTEC INC. is 12% should the company invest in this project? Show all your work and justify your recommendation to receive any credit.
As assistant to the CFO of XYZ Inc., you must estimate the Year 1 cash flow for a project with the following data. What is the Year 1 cash flow? Sales Revenue $8,000 Depreciation $3,500 Operating Expenses $4,000 Tax Rate 40%
Assume a company can buy a new facility that will cost $3,250,000 and is expected to generate $855,000 a year in revenue for the first three years and $425,000 a year in revenue for the next three years. The company's weighted cost of capital (WACC) is 6.5% per year. What is the IRR for this investment? 5.38% 5.88% © 6.00%
Provide correct answer
Joetz Corporation has gathered the following data on a proposed investment project (Ignore income taxes.): Investment required in equipment $ 33,500 Annual cash inflows $ 7,400 Salvage value of equipment $ 0 Life of the investment 15 years Required rate of return 10% The company uses straight-line depreciation on all equipment. Assume cash flows occur uniformly throughout a year except for the initial investment. The simple rate of return for the investment (rounded to the nearest tenth of a percent) is: Brewer 9e Rechecks 2021-11-26 Multiple Choice 24.7% 15.4% 21.6% 11.2%
Sb. A large profitable corporation is considering a capital investment of $50,000. The equipment has a projected salvage value of $0 at the end of the two-year project period. The annual gross income each of the next two years is projected to be $44,000O and expenses are projected to be $14,000 annually. The depreciation amount will be $25,000 annually. This profitable corporation has an incremental income tax rate of 25% and the MARR is 10% Determine the taxable income for Year 2 (only - not a total). Edit Format Table
Halls Construction is analyzing its capital expenditure proposals for the purchase of equipment in the coming year. The capital budget is limited to $5,000,000 for the year. Laura Bentley, staff analyst at Halls, is preparing an analysis of the three projects under consideration by Caden Halls, the company's owner. Data Table A B C D 1 Project A Project B Project C 2 Projected cash outflow 3 Net initial investment $3,000,000 $2,100,000 $3,000,000 4 Projected cash inflows 5 Year 1 $1,200,000 $1,200,000 $1,700,000 6 Year 2 1,200,000 600,000 1,700,000 7 Year 3 1,200,000 500,000 200,000 8 Year 4 1,200,000 100,000 9 Required rate of return 6% 6% 6 1.. Calculate the payback period for each of the three projects. Ignore income taxes. Using the payback method, which projects should Halls choose?. Ignore income taxes. (Round your answers to…
provide answer please
A firm with a 14% WACC is evaluating two projects for this year's capital budget. After-tax cash flows, including depreciation, are as follows: Project M Project N -Select- 0 2 + -$18,000 $6,000 $6,000 $6,000 $6,000 $6,000 -$54,000 $16,800 $16,800 $16,800 $16,800 $16,800 a. Calculate NPV for each project. Do not round Intermediate calculations. Round your answers to the nearest cent. Project M: $ Project N: $ Calculate IRR for each project. Do not round Intermediate calculations. Round your answers to two decimal places. Project M: Project N: Calculate MIRR for each project. Do not round Intermediate calculations. Round your answers to two decimal places. Project M: Project N Calculate payback for each project. Do not round Intermediate calculations. Round your answers to two decimal places. Project M: Project N years Calculate discounted payback for each project. Do not round Intermediate calculations. Round your answers to two decimal places. Project M: -Select- % Select % % % years…
Plant company is contemplating the purchase of a new piece of equipment for $59,000. Plant is in the 20% income tax bracket.
Sa. A large profitable corporation is considering a capital investment of $50,000. The equipment has a projected salvage value of $0 at the end of the two-year project period. The annual gross income each of the next two years is projected to be $44,000 and expenses are projected to be $14,000 annually. The depreciation amount will be $25,000 annually. This profitable corporation has an incremental income tax rate of 25% and the MARR is 10%. Determine the before-tax CF for Year 2 (only – not a total).
3. Solar Solutions has purchased new manufacturing equipment that cost $400,000. Calculate the yearly tax savings from the CCA tax shield for the next three years. Assume that the income tax rate is 30%, the CCA rate is 30%, and the weighted-average cost of capital (WACC) is 12%. Assume that CCA in the first year is subject to the accelerated depreciation method for the year of acquisition. (Hint. Use Microsoft Excel to calculate the discount factor(s).) (Do not round your intermediate calculations. Round your final answers to 2 decimal places.) X Answer is complete but not entirely correct. Year 1 2 3 $ $ $ PV of Tax Savings 91,071.43 x 56,919.64 X 35,574.78 X

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