Buhler Industries is a farm implement manufacturer. Management is currently evaluating a proposal to build a plant that will manufacture lightweight tractors. Buhler plans to use a cost of capital of12% to evaluate this project. Based on extensive research, it has prepared the following incomplete incremental free cash flow projections (in millions of dollars):Year 0Free Cash Flow ($000,000s)Revenues- Manufacturing expenses (other than depreciation)- Marketing expenses- CCA= EBIT- Taxes (35%)= Unlevered net income+ CCA- Increases in net working capital- Capital expenditures+ Continuation value= Free cash flow- 146.00- 146.00Years 1-9 Year 10106.00- 30.00- 9.00?????- 5.00?106.00- 30.00- 9.00?????- 5.0010.00?The relevant CCA rate for the capital expenditures is 10%. Assume assets are never sold.a. For this base-case scenario, what is the NPV of the plant to manufacture lightweight tractors?b. Based on input from the marketing department, Buhler is uncertain about its revenue forecast. In particular, management would like to examine the sensitivity of the NPV to the revenueassumptions. What is the NPV of this project if revenues are 10% higher than forecast? What is the NPV of this project if revenues are 10% lower than forecast?Using the indirect method requires a separate calculation of the CCA tax shield. What is the present value of the CCA tax shield?The present value of the CCA tax shield is $million. (Round to two decimal places.)

We can determine the PV of CCA tax shield with no salvage value by using the formula below:In the…

Answered: Using the indirect method requires a…

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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The interest tax shield year 1 is ______$ million (Round to three decimal places) The interest tax shield year 2 is ______$ million (Round to three decimal places) The interest tax shield year 3 is ______$ million (Round to three decimal places) The interest tax shield year 4 is ______$ million (Round to three decimal places) The interest tax shield year 5 is ______$ million (Round to three decimal places)
Given the following tax structure: Taxpayer Salary Total tax $ 10,000 $ 600 $ 20,000 ??? Mae Pedro Required: a. What is the minimum tax that Pedro should pay to make the tax structure vertically equitable based on the tax rate paid? Note: Round your final answer to nearest whole dollar amount. b. This would result in what type of tax rate structure?
Fill in the missing numbers for the following income statement. (Do not round intermediate calculations.) Sales Costs Depreciation EBIT Taxes (24%) Net income b. b. Calculate the OCF. (Do not round intermediate calculations.) c. What is the depreciation tax shield? (Do not round intermediate calculations.) C. $ OCF 662,600 424,300 100,700 Depreciation tax shield
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If the tax rates are 15% on the first $50,000 of taxable income, and 20% on the next $25,000, and 25% on the next $25,000, what is the tax liability for an individual with $80,000 of taxable income, what is the marginal tax rate, and what is the average tax rate ? a. $10,250, 15%, and 20% b. $25,122, 22%, and 16% c. $11,345, 15%, and 34% d. $13,750, 25%, and 17.19%
Given the following tax structure, Taxpayer Salary Total tax $21,500 $1,032 $46,000 ??? Mae Pedro a. What is the minimum tax that Pedro should pay to make the tax structure vertically equitable based on the tax rate paid? (Round your final answer to nearest whole dollar amount.) Minimum tax b. This would result in what type of tax rate structure? Tax rate structure
The government of Lesotho charges 10% on income up to M75 000 plus 16% any amount over M70 000 up M300 000 and 26% of any amount over M300 000. Express the above as a tax function. Find the income tax for an income of M125 000. Compute the income tax of an income of M350 000.
2. Help me answer the given question. Do not round off answers while solving, instead just the final answer will be rounded off to one decimal places.

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Using the indirect method requires a separate calculation of the CCA tax shield. What is the present value of the CCA tax shield? The present value of the CCA tax shield is $ million. (Round to two decimal places.)