Your company is considering a new project that will require $767,000 million of new equipment at the start of the project. Theequipment will have a depreciable life of 8 years and will be depreciated to a book value of $143,000 using straight-line depreciation.Neither bonus depreciation nor Section 179 expensing will be used. The cost of capital is 11 percent, and the firm's tax rate is 21percent.Estimate the present value of the tax benefits from depreciation.Note: Round your answer to 2 decimal places.> Answer is complete but not entirely correct.Present value $ 120,419.27

Present value refers to the discounted value of all future cash flows at a specified rate of…

Answered: Your company is considering a new…

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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Esfandairi Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2.45 million. The fixed asset will be depreciated straight-line to zero over its three-year tax life, after which time it will be worthless. The project is estimated to generate $1,795,000 in annual sales, with costs of $705,000. The tax rate is 22 percent and the required return on the project is 10 percent. What is the project's NPV? (Do not round intermediate calculations. Enter your answer in dollars, not millions of dollars, and round your answer to 2 decimal places, e.g., 1,234,567.89.) NPV
Your company is considering a new project that will require $825,000 of new equipment at the start of the project. The equipment will have a depreciable life of 9 years and will be depreciated to a book value of $141,000 using straight-line depreciation. The cost of capital is 12 percent, and the firm’s tax rate is 35 percent. Estimate the present value of the tax benefits from depreciation. (Round your answer to 2 decimal places.)
Esfandairi Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2,350,000. The fixed asset will be depreciated straight-line to zero over its three-year tax life. The project is estimated to generate $3,330,000 in annual sales, with costs of $2,330,000. The project requires an initial investment in net working capital of $180,000, and the fixed asset will have a market value of $215,000 at the end of the project. Assume that the tax rate is 23 percent and the required return on the project is 11 percent. a. What are the net cash flows of the project each year? Note: A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answers to the nearest whole number, e.g., 32. b. What is the NPV of the project? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. a. Year 0 cash flow Year 1 cash flow Year 2 cash flow Year 3 cash flow b.…
Esfandairi Enterprises is considering a new 3 - year expansion project that requires an initial fixed asset investment of $2.34 million. The fixed asset will be depreciated straight line to zero over its 3-year tax life, after which time it will be worthless. The project is estimated to generate $1, 740, 000 in annual sales, with costs of $650,000. The tax rate is 21 percent and the required return is 11 percent. What is the project's NPV?
A company is considering a new 3-year expansion project that requires an initial fixed asset investment of $2.18 million. The fixed asset will be depreciated straight-line to zero over its 3-year tax life. The project is estimated to generate $1,730,000 in annual sales, costing $640,000. The project requires an initial investment in net working capital of $290,000, and the fixed asset will have a market value of $240,000 at the end of the project. a. If the tax rate is 24 percent, what is the project’s Year 0 net cash flow? Year 1? Year 2? Year 3? (Do not round intermediate calculations) b. If the required return is 12 percent, what is the project's NPV? Please use excel and show the equations used. Thanks
Esfandairi Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2.29 million. The fixed asset will be depreciated straight-line to zero over its three-year tax life. The project is estimated to generate $1,790,000 in annual sales, with costs of $700,000. The project requires an initial investment in net working capital of $410,000, and the fixed asset will have a market value of $420,000 at the end of the project. a. If the tax rate is 21 percent, what is the project's Year O net cash flow? Year 1? Year 2? Year 3? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answers in dollars, not millions of dollars, e.g., 1,234,567.) b. If the required return is 12 percent, what is the project's NPV? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) a. Year 0 cash flow a. Year 1 cash flow a. Year 2 cash flow a. Year 3 cash flow…
Management expects a project to generate EBIT of $600,000 per year for 4 years.Depreciation expense is expected to be $225,000 per year and the corporation’s tax rateis 40%. The project will require an increase in net working capital of $50,000 in yearone and allow a decrease in net working capital of $25,000 in year four. The capitalexpenditure for the project will occur in year zero. What is the free cash flow for theproject in year one?
Down Under Boomerang, Inc., is considering a new 3-year expansion project that requires an initial fixed asset investment of $2.31 million. The fixed asset will be depreciated straight-line to zero over its 3-year tax life. The project is estimated to generate $1,770,000 in annual sales, with costs of $680,000. The project requires an initial investment in net working capital of $370,000, and the fixed asset will have a market value of $360,000 at the end of the project. a. If the tax rate is 22 percent, what is the project's Year O net cash flow? Year 1? Year 2? Year 3? (Do not round intermediate calculations and enter your answers in dollars, not millions of dollars, e.g., 1,234,567. A negative answer should be indicated by a minus sign.) b. If the required return is 12 percent, what is the project's NPV? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) a. Year 0 cash flow Year 1 cash flow Year 2 cash flow Year 3 cash flow b. NPV
A firm is considering a new seven-year expansion project with an initial fixed asset investment of $3.9 million. The fixed asset will be depreciated straight-line to zero over its seven-year tax life, after which time it will be worthless. No bonus depreciation will be taken. The project is estimated to generate $2,479,000 in annual sales, with costs of $791,000. The tax rate is 20 percent and the required return is 7.2 percent. What is the net present value of this project? Instruction: Enter your response rounded to two decimal places.
Esfandairi Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2.18 million. The fixed asset will be depreciated straight- line to zero over its three-year tax life, after which time it will be worthless. The project is estimated to generate $1.645 million in annual sales, with costs of $610,000. The project requires an initial investment in net working capital of $250,000, and the fixed asset will have a market value of $180,000 at the end of the project. The tax rate is 21 percent. a. What is the project's Year O net cash flow? Year 1? Year 2? Year 3? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answers in dollars, not millions of dollars, e.g., 1,234,567.) b. If the required return is 12 percent, what is the project's NPV? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) a. Year 0 cash flow a. Year 1 cash flow…
DDR Enterprises is analyzing an expansion project. The project's installed cost is $80,000. It is eligible for 100% bonus depreciation. The project has a $12,000 salvage value at the end of its five year expected life. The project will requie an additional $8,000 investment in net working capital. The tax rate is 25%. What is the project's initial investment? If you could show the steps in calcualtion too that would be great!
Esfandairi Enterprises is considering a new 3-year expansion project that requires an initial fixed asset investment of $2.31 million. The fixed asset will be depreciated straight- line to zero over its 3-year tax life, after which time it will be worthless. The project is estimated to generate $1,785,000 in annual sales, with costs of $695,000. The tax rate is 25 percent and the required return is 12 percent. What is the project's NPV? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to 2 decimal places, e.g., 1,234,567.89.) NPV

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