10.The potential owner/managers of the yet to be formed new In-Line BladeCompany are evaluating the prospects for the business. The new equipment isexpected to be $5.5 million and have after tax cashflows of $400,000 for the firsttwo years, $750,000 in the next two years, and $1,200,000 thereafter indefinitely.The owners estimate that they require a 15% rate of return. What number isclosest to the value of the In-Line Blade Company?A) $3,872,122B) $446,148C) -$2,000,000D) $943,596E) $105,185

Given information : Year Cash flows 0 -5500000 1 400000 2 400000 3 750000 4 750000 5…

The potential owner/managers of the yet to be formed new In-Line Bla Company are evaluating the prospects for the business. The new equi expected to be $5.5 million and have after tax cashflows of $400,000 two years, $750,000 in the next two years, and $1,200,000 thereafter it The owners estimate that they require a 15% rate of return. What num closest to the value of the In-Line Blade Company?

The potential owner/managers of the yet to be formed new In-Line Bla Company are evaluating the prospects for the business. The new equi expected to be $5.5 million and have after tax cashflows of $400,000 two years, $750,000 in the next two years, and $1,200,000 thereafter it The owners estimate that they require a 15% rate of return. What num closest to the value of the In-Line Blade Company?

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 need to estimate the value of Laputa Aviation. You have the following forecasts (in millions of dollars) of its profits and of its future investments in new plant and working capital: Year 1 2 3 4 Earnings before interest, taxes, depreciation, and amortization (EBITDA) Depreciation $ 75 $ 95 $ 110 $ 115 15 25 30 35 Pretax profit 60 Tax at 30% 18 Investment 17 20 222 70 80 80 21 24 24 23 25 From year 5 onward, EBITDA, depreciation, and investment are expected to remain unchanged at year-4 levels. Laputa is financed 40% by equity and 60% by debt. Its cost of equity is 16%, its debt yields 7%, and it pays corporate tax at 30%. a. Estimate the company's total value. Note: Do not round intermediate calculations. Enter your answer in millions rounded to the nearest whole amount. b. What is the value of Laputa's equity? Note: Do not round intermediate calculations. Enter your answer in millions rounded to the nearest whole amount. a. Total value b. Laputa's equity
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Southern Tours is considering acquiring Holiday Vacations. Management believes Holiday Vacations can generate cash flows of $185,000, $225,000, and $345,000 over the next three years, respectively. After that time, they feel the business will be worthless. If the desired rate of return is 12 percent, what are the maximum Southern Tours should pay today to acquire Holiday Vacations? a. 503,098 b. 538,615 c. $545,920 d. $590,110
You need to estimate the value of Laputa Aviation. You have the following forecasts (in millions of dollars) of its profits and of its future investments in new plant and working capital: Earnings before interest, taxes, depreciation, and amortization (EBITDA) Depreciation Pretax profit Tax at 30% Investment Answer is complete but not entirely correct. a. Total value b. Laputa's equity 1 $ 86 26 60 18 15 $ $ Year 629 x 377 2 $ 106 36 70 21 18 3 $ 121 41 80 From year 5 onward, EBITDA, depreciation, and investment are expected to remain unchanged at year-4 levels. Laputa is financed 60% by equity and 40 % by debt. Its cost of equity is 17%, its debt yields 8%, and it pays corporate tax at 30%. 24 21 a. Estimate the company's total value. Note: Do not round intermediate calculations. Enter your answer in millions rounded to the nearest whole amount. b. What is the value of Laputa's equity? Note: Do not round intermediate calculations. Enter your answer in millions rounded to the nearest…
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: Assume that the company, where you are working as a team in FinancialDepartment, is considering a potential project with a new product that is expected to sell foran average price of $22 per unit and the company expects it can sell 650 000 unit per year atthis price for a period of 4 years. Launching this project will require purchase of a $3 500 000equipment that has residual value in four years of $500 000 and adding $ 850 000 in workingcapital which is expected to be fully retrieved at the end of the project. Other information isavailable below:Depreciation method: straight lineVariable cost per unit: $17Cash fixed costs per year: $450 000Discount rate: 10%Tax Rate: 30%Do a scenario analysis with cash flows of the assumed project to determine the sensitivity ofthe project’s NPV to different scenarios that are defined in terms of the estimated values foreach of the project’s value drivers. Please work on two scenarios corresponding to the worstand best-case outcomes for the…
You need to estimate the value of Laputa Aviation. You have the following forecasts (in millions of dollars) of its profits and of its future investments in new plant and working capital: Earnings before interest, taxes, depreciation, and amortization (EBITDA) Depreciation Pretax profit Tax at 30% Investment 1 $ 75 15 60 18 17 Year a. Total value b. Laputa's equity 2 $ 95 25 70 21 20 3 $ 110 30 80 24 23 4 $ 115 35 80 24 25 From year 5 onward, EBITDA, depreciation, and investment are expected to remain unchanged at year-4 levels. Laputa is financed 40% by equity and 60% by debt. Its cost of equity is 16%, its debt yields 7%, and it pays corporate tax at 30%. a. Estimate the company's total value. Note: Do not round intermediate calculations. Enter your answer in millions rounded to the nearest whole amount. b. What is the value of Laputa's equity? Note: Do not round intermediate calculations. Enter your answer in millions rounded to the nearest whole amount.
Bottoms up Diaper Service is considering the purchase of a new industrial washer. It can purchase the washer for $3,600 and sell its old washer for $900. The new washer will last for 6 years and save $1,100 a year in expenses. The opportunity cost of capital is 20% and the firms tax rate is 21%. a) if the firm uses straight-line depreciation over a 6 year life, what are the cash flows of the project in years 0 to 6? The new washer will have zero salvage value after 6 years, and the old washer is fully depreciated. (negative amounts should be indicated by a minus sign.) annual operating cash flow in year 0? annual operating cash flow in years 1 to 6? b) what is the project NPV? (Do not round intermediate calculations. round answer to 2 decimal places. c) what is the NPV if the investment is entitled to immediate 100% bonus depreciation? (do not round intermediate calculations. round your answer to 2 decimals places.
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Accounting The SWEET Corp. is considering the purchase of a new piece of equipment. The cost savings from the equipment would result in an annual increase in cash flow of $200,000. The equipment will have an initial cost of $900,000 and have a 6-year life. The salvage value is $60,000 at the end of the sixth year. If the hurdle rate is 12%, the internal rate of return is ____ %. (express your final answer in basis points, i.e., 13.14%)
Nikul

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