QUESTION-04XYZ Company Ltd wants to invest Tk. 5 lacs in a new project. The duration of the project is 5 Years. TheCompany uses a straight-line method of depreciation. The Company tax rate is 40% and has no salvagevalue. The cash flows of the company are BDT 120000, BDT 150000, BDT 130000, BDT 100000, andBDT 180000 respectively. If the cost of capital is 8%, then calculate the IRR of the project.

Investment in new project = 500,000 Time period = 5 years Tax rate = 40% Cost of capital = 8%

Answered: XYZ Company Ltd wants to invest Tk. 5…

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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A project will increase sales by $184,500 and cash expenses by $88,900. The project will require investment in equipment of $53,000 and be depreciated using straight line depreciation to a zero book value over the four-year life of the project. The company has a marginal tax rate of 21 percent. What is the operating cash flow of the project? $108,552.25 None of these options are correct o $78,306.50 $75,524.00 o $95,600.00
Terminal Ltd purchased a machine at R80 000 two years ago. This machine can be replaced with a new machine at a cost of R100 000. The new machine can be sold for R30 000 after completion of a 5-year project. The old machine can be sold for R15 000 today. The SARS capital allowance on both machines is calculated at 20% per year. Net working capital will decrease with R1 500 at the end of the project life. Assume a tax rate of 28%. What is the net cash flow of the project in year 5? R20 100 R21 600 R30 000 R28 500 R8 400
The Wet Corporation has an investment project that will reduce expenses by $30,000 per year for 3 years. The project's cost is $30,000. If the asset is part of the 3 year MACRS category (33.33% first year depreciation) and the company's combined tax rate is 29%, what is the cash flow from the project in year 1? Note: Do not round intermediate calculations. Round your answer to the nearest dollar amount. Multiple Choice $23,650 $24.980 $24.200 $25,660
A project will increase sales by $60,000 and cash expenses by $51,000. The project will cost $40,000 and will be depreciated using straight- line depreciation to a zero book value over the 4-year life of the project. The company has a marginal tax rate of 35%. What is the operating cash flow of the project using the tax shield approach? O $9,350 O $9,700 O $8,650 O $5,850
The Alabi corp is considering a project which requires an expenditure of $100,000 at t=0 intially, it will have additional revenue sales of $150k per year for the next to years (t=1 & t=2) with expenses of $30k per year for operating costs and general expenses attributed with the project but does not include depreciation of the intial expenditure of the $100k. The depreciation is straight line with zero salvage . Alabi weighted average cost of capital is 9.13% and taxed at 30%. What is the net present value for the project?

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