You are evaluating a project for The Ultimate recreational tennis racket, guaranteed to correct that wimpy backhand. You estimate the sales price of The Ultimate to be $410 per unit and sales volume to be 1,000 units in year 1; 1,250 units in year 2; and 1,325 units in year 3. The project has a 3-year life. Variable costs amount to $230 per unit and fixed costs are $100,000 per year. The project requires an initial investment of $168,000 in assets, which can be depreciated using bonus depreciation. The actual market value of these assets at the end of year 3 is expected to be $36,000. NWC requirements at the beginning of each year will be approximately 25 percent of the projected sales during the coming year. The tax rate is 21 percent and the required return on the project is 11 percent. (Use SL depreciation table) What will the cash flows for this project be? Note: Negative amounts should be indicated by a minus sign. Round your answers to 2 decimal places. Year Total cash flow 2

You are evaluating a project for The Ultimate recreational tennis racket, guaranteed to correct that wimpy backhand. You estimate the sales price of The Ultimate to be $410 per unit and sales volume to be 1,000 units in year 1; 1,250 units in year 2; and 1,325 units in year 3. The project has a 3-year life. Variable costs amount to $230 per unit and fixed costs are $100,000 per year. The project requires an initial investment of $168,000 in assets, which can be depreciated using bonus depreciation. The actual market value of these assets at the end of year 3 is expected to be $36,000. NWC requirements at the beginning of each year will be approximately 25 percent of the projected sales during the coming year. The tax rate is 21 percent and the required return on the project is 11 percent. (Use SL depreciation table) What will the cash flows for this project be? Note: Negative amounts should be indicated by a minus sign. Round your answers to 2 decimal places. Year Total cash flow 2

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 are evaluating a project for The Ultimate recreational tennis racket, guaranteed to correct that wimpy backhand. You estimate the sales price of The Ultimate to be $340 per unit and sales volume to be 1.000 units in year 1. 1.250 units in year 2, and 1,325 units in year 3. The project has a 3-year life. Variable costs amount to $195 per unit and fixed costs are $100,000 per year. The project requires an initial investment of $147,000 in assets, which can be depreciated using bonus depreciation. The actual market value of these assets at the end of year 3 is expected to be $29,000 NWC requirements at the beginning of each year will be approximately 20 percent of the projected sales during the coming year. The tax rate is 21 percent and the required return on the project is 11 percent. (Use SL depreciation table) What will the cash flows for this project be? Note: Negative amounts should be indicated by a minus sign. Round your answers to 2 decimal places. Year Total cash flow 0
You are evaluating a project for The Farstroke golf club, guaranteed to correct that nasty slice. You estimate the sales price of The Farstroke to be $420 per unit and sales volume to be 1,000 units in year 1, 1,500 units in year 2, and 1,325 units in year 3. The project has a 3-year life. Variable costs amount to $235 per unit and fixed costs are $100,000 per year. The project requires an initial Investment of $171,000 in assets, which can be depreciated using bonus depreciation. The actual market value of these assets at the end of year 3 is expected to be $37.000. NWC requirements at the beginning of each year will be approximately 30 percent of the projected sales during the coming year. The tax rate is 21 percent and the required return on the project is 12 percent What change in NWC occurs at the end of year 12 (Enter a decrease as a negative amount using a minus sign.)
Please use a financial calculator to solve. Be sure to list your steps. You are evaluating two different silicon wafer milling machines. The Techron I costs $237,000, has a three - year life, and has pretax operating costs of $62, 000 per year. The Techron II costs $415, 000, has a five - year life, and has pretax operating costs of $35, 000 per year. For both milling machines, use straight - line depreciation to zero over the project's life and assume a salvage value of $ 39,000. If your tax rate is 21 percent and your discount rate is 8 percent, compute the EAC for both machines. (Your answer should be a negative value and indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g ., 32.16.)
Consider a project to supply Detroit with 25,000 tons of machine screws annually for automobile production. You will need an initial $5,400,000 investment in threading equipment to get the project started; the project will last for 6 years. The accounting department estimates that annual fixed costs will be $1,300,000 and that variable costs should be $245 per ton; accounting will depreciate the initial fixed asset investment straight-line to zero over the 6-year project life. It also estimates a salvage value of $675,000 after dismantling costs. The marketing department estimates that the automakers will let the contract at a selling price of $356 per ton. The engineering department estimates you will need an initial net working capital investment of $520,000. You require a return of 9 percent and face a tax rate of 21 percent on this project. Calculate the accounting, cash, and financial break-even quantities. (Do not round intermediate calculations and round your answers to the…
You are evaluating a project for The Farpour golf club, guaranteed to correctthat nasty slice. You estimate the sales price of The Tiff-any to be $400 per unitand sales volume to be 1000 units in year 1; 1500 units in year 2; and 1325units in year 3. The project has a three-year life. Variable costs amount to $225per unit and fixed costs are $100,000 per year. The project requires an initialinvestment of $165,000 in assets which will be depreciated straight-line to zeroover the three-year project life. The actual market value of these assets at theend of year 3 is expected to be $35,000. NWC requirements at the beginning ofeach year will be approximately 20 percent of the projected sales during thecoming year. The tax rate is 34 percent and the required return on the project is10 percent. What change in NWC occurs at the end of year 1?
You are evaluating a project for The Farstroke golf club, guaranteed to correct that nasty slice. You estimate the sales price of The Farstroke to be $490 per unit and sales volume to be 1,200 units in year 1; 1,125 units in year 2; and 1,000 units in year 3. The project has a 3-year life. Variable costs amount to $270 per unit and fixed costs are $100,000 per year. The project requires an initial investment of $138,000 in assets, which can be depreciated using bonus depreciation. The actual market value of these assets at the end of year 3 is expected to be $26,000. NWC requirements at the beginning of each year will be approximately 30 percent of the projected sales during the coming year. The tax rate is 21 percent and the required return on the project is 11 percent. What is the operating cash flow for the project in year 2? Note: Enter your answer as a whole number. Operating cash flow
You have been asked to determine the most financially advantageous option for a new Product Packaging machine. It has been determined by the Marketing Department that product packaging actually makes a difference in the anticipated Yearly Revenue generated by this product and have been provided below. The director now wants an annual worth analysis performed on the two final designs based on a shortened project life of only 9 years. Compare the alternatives at the MARR of 10% per year. (all dollar values are in thousands) Packaging Packaging Machine Design Machine Design A B First Cost, $ -900 -1,500 AOC, $ per year -200 -300 Salvage value, $ (after 7 years of use) 200 Salvage value, $ (after 3 years of use) 100 Salvage value, $ (after 2 years of use) 20 50 Annual revenue, $ per year 800 900 Life, years 3 7 AW ($K per year) for one full life 268.312 312.967 cycle AW for a particle life of 2 years ($K 90.953 -240.476 per year) Assuming that the AW values for Designs A and B provided in…
You are evaluating a project for The Farstroke golf club, guaranteed to correct that nasty slice. You estimate the sales price of The Farstroke to be $400 per unit and sales volume to be 1,000 units in year 1; 1,500 units in year 2; and 1,325 units in year 3. The project has a 3-year life. Variable costs amount to $225 per unit and fixed costs are $100,000 per year. The project requires an initial investment of $165,000 in assets, which can be depreciated using bonus depreciation. The actual market value of these assets at the end of year 3 is expected to be $35,000. NWC requirements at the beginning of each year will be approximately 20 percent of the projected sales during the coming year. The tax rate is 21 percent and the required return on the project is 10 percent. What change in NWC occurs at the end of year 1?
sa
You are evaluating a project for The Farstroke golf club, guaranteed to correct that nasty slice. You estimate the sales price of The Farstroke to be $450 per unit and sales volume to be 1,200 units in year 1; 1,325 units in year 2; and 1,000 units in year 3. The project has a 3-year life. Variable costs amount to $250 per unit and fixed costs are $100,000 per year. The project requires an initial investment of $150,000 in assets, which can be depreciated using bonus depreciation. The actual market value of these assets at the end of year 3 is expected to be $30,000. NWC requirements at the beginning of each year will be approximately 20 percent of the projected sales during the coming year. The tax rate is 21 percent and the required return on the project is 10 percent. What is the operating cash flow for the project in year 2? Note: Enter your answer as a whole number. Operating cash flow
You are evaluating a project for The Farstroke golf club, guaranteed to correct that nasty slice. You estimate the sales price of The Farstroke to be $490 per unit and sales volume to be 1,200 units in year 1; 1,125 units in year 2; and 1,000 units In year 3. The project has a 3-year life. Variable costs amount to $270 per unit and fixed costs are $100,000 per year. The project requires an initial Investment of $138,000 in assets, which can be depreciated using bonus depreciation. The actual market value of these assets at the end of year 3 is expected to be $26,000. NWC requirements at the beginning of each year will be approximately 30 percent of the projected sales during the coming year. The tax rate is 21 percent and the required return on the project is 11 percent. What change in NWC occurs at the end of year 1? (Enter a decrease as a negative amount using a minus sign.) Decrease of
You are evaluating a project for The Ultimate recreational tennis racket, guaranteed to correct that wimpy backhand. You estimate the sales price of The Ultimate to be $450 per unit and sales volume to be 1,000 units in year 1; 1,250 units in year 2; and 1,325 units in year 3. The project has a 3-year life. Variable costs amount to $250 per unit and fixed costs are $100,000 per year. The project requires an initial investment of $180,000 in assets, which can be depreciated using bonus depreciation. The actual market value of these assets at the end of year 3 is expected to be $40,000. NWC requirements at the beginning of each year will be approximately 25 percent of the projected sales during the coming year. The tax rate is 21 percent and the required return on the project is 12 percent. (Use SL depreciation table) What will the cash flows for this project be? Note: Negative amounts should be indicated by a minus sign. Round your answers to 2 decimal places. Year Total cash flow 0 1 2…

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