Today ABC Corp. starts a project that requires it to invest in new equipment of $990,000. Doing so will earn ABC pre-tax cash flows of $142,000 annually over 9 years. The equipment has a salvage value of $187,000. ABC's cost of capital is 6.30%, and its tax rate is 30%. The equipment falls into the 30% CCA class (half year rule applies). What is the NPV of the project? PLEASE USE FINANCIAL CALCULATOR OR FORMULA NO EXCEL OR SPREADSHEETS THE ANSWER IS NOT CHOICE B a.

Today ABC Corp. starts a project that requires it to invest in new equipment of $990,000. Doing so will earn ABC pre-tax cash flows of $142,000 annually over 9 years. The equipment has a salvage value of $187,000. ABC's cost of capital is 6.30%, and its tax rate is 30%. The equipment falls into the 30% CCA class (half year rule applies). What is the NPV of the project? PLEASE USE FINANCIAL CALCULATOR OR FORMULA NO EXCEL OR SPREADSHEETS THE ANSWER IS NOT CHOICE B a.

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter12: Capital Budgeting: Decision Criteria

Section: Chapter Questions

Problem 22P: The Scampini Supplies Company recently purchased a new delivery truck. The new truck cost $22,500,...

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The Scampini Supplies Company recently purchased a new delivery truck. The new truck cost $22,500, and it is expected to generate net after-tax operating cash flows, including depreciation, of $6,250 per year. The truck has a 5-year expected life. The expected salvage values after tax adjustments for the truck are given here. The company’s cost of capital is 10%. Should the firm operate the truck until the end of its 5-year physical life? If not, then what is its optimal economic life? Would the introduction of salvage values, in addition to operating cash flows, ever reduce the expected NPV and/or IRR of a project?
A company is evaluating a new 4-year project. The equipment necessary for the project will cost $2,950,000 and can be sold for $660,000 at the end of the project. The asset the 5-year MACRS class. The depreciation percentage each year is 20.00 percent, 32.00 percent, 19.20 percent, 11.52 percent and 11.52 percent, respectively. The company's tax rate is 35 percent. What is the aftertax salvage value of the equipment?
your company is considering a new project that will require $10,000 of new equipment at the start of the project. T he equipment will have a depreciable life of five years and will be depreciated to a book value of $3000 using straight line depreciation. the cost of capital is 9 percent and the firm tax rate is 21 percent. estimate the present value of the tax benifits frm depreciation.
ZUD Inc is evaluating a 10-year project that requires an investment today of $9.4 million in assets that they can depreciate for tax purposes. Given that ZUD will employ straight-line depreciation to a zero book value over the life of the project, what will be the annual depreciation tax shield if ZUD's tax rate is 26%? A) $240,000 B) $243,600 C) $244,400 D) $249,600
Brummit Corporation, is evaluating a new 4 year project. The equipment necessary for the project will cost $2.250,000 and can be sold for $291,000 at the end of the project. The asset is in the 5-year MACRS class The depreciation percentage each year is 20.00 percent, 32.00 percent, 19 20 percent, 11.52 percent, and 11 52 percent, respectively. The company's tax rate is 24 percent What is the aftertax salvage value of the equipment? Mutiple Choice O $221360 $291.000 $252.264 $314.472 $267,528
The Wet Corporation has an investment project that will reduce expenses by $20,000 per year for 3 years. The project's cost is $25,000. If the asset is part of the 3-year MACRS category (33.33% first year depreciation) and the company's combined tax rate is 35%, what is the cash flow from the project in year 1 ?
Celtic Inc. is considering a 16-year project that will generate before tax cash flow of $18,000 peryear for 16 years. The project requires a machine that costs $96,000. The CCA rate is 20% andthe salvage value is $9,600. Celtic has cash of $66,000 and needs to borrow the balance at 6%interest rate to purchase the machine. Celtic is required to repay $10,000 at year 4 and theremaining balance at year 16. The corporate tax rate is 30%.If the weighted average cost of capital is 11% and the machine is the only asset in the assetclass, calculate the NPV of the project using the WACC approach.
Celtic Inc. is considering a 16-year project that will generate before tax cash flow of $18,000 peryear for 16 years. The project requires a machine that costs $96,000. The CCA rate is 20% andthe salvage value is $9,600. Celtic has cash of $66,000 and needs to borrow the balance at 6%interest rate to purchase the machine. Celtic is required to repay $10,000 at year 4 and theremaining balance at year 16. The corporate tax rate is 30%. (a) If the cost of unlevered equity is 12%, the asset class remains open with a positive UCCafter the project ends, and flotation cost is 2% of the amount borrowed, calculate the NPV ofthe project using the APV approach.(b) If the cost of equity is 14% and the asset class remains open with a positive UCC after theproject ends, calculate the NPV of the project using the FTE approach.(c) If the weighted average cost of capital is 11% and the machine is the only asset in the assetclass, calculate the NPV of the project using the WACC approach.
The Wet Corporation has an investment project that will reduce expenses by $30,000 per year for 3 years. The project's cost is $35,000. If the asset is part of the 3-year MACRS category (33.33% first year depreciation) and the company's combined tax rate is 27%, what is the cash flow from the project in year 17 Note: Do not round intermediate calculations. Round your answer to the nearest dollar amount. Multiple Choice $24,500 $25,830 $25,050 $26.510
Umbrella Corp., has a WACC of 10.2% and a tax rate of 26%. Project Alice requires an upfron cost of $150,000 for equipment at time (0). This equipment can be depreciated (straight-line... equal amounts) over the next three years. At the end of those three years, the equipment will have zero salvage value. Using this equipment will result in a $30,000 increase in working capital which can be recovered in year three after the machine goes offline. There project should generate $140,000 in gross revenue and incur operating cost of $60,000 every year for the next three years (not including depreciation expense). What is the net present value of Project Alice to the nearest dollar?
Your Company is considering a new project that will require $10,000 of new equipment at the start of the project. The equipment will have a depreciable life of 5 years and will be depreciated to a book value of $3,000 using straight-line depreciation. The cost of capital is 9%, and the firm's tax rate is 21%. Estimate the present value of the tax benefits from depreciation. $1,400 $1,106 $1,144 $294
A company wants to buy a new machine for $5 million. The machine can be used for 7 years. It will generate constant revenues of $1.3 million per year. The annual expenses on maintenance etc are $150,000. The salvage value is $200,000. The depreciation method used is the 150% Declining Balance method. The (after-tax) MARR is 12% and the corporate taxes are 30%. A) Should this project be accepted or not? (USE EXCEL AND PUT THE FORMULAS) PLEASE