Principles of Managerial Finance (14th Edition) (Pearson Series in Finance)
14th Edition
ISBN: 9780133507690
Author: Lawrence J. Gitman, Chad J. Zutter
Publisher: PEARSON
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Question
Chapter 11, Problem 1OR
a)
Summary Introduction
Case summary:
Company DCD is the largest distributor of graphic novels and comics in the world. In the year 2013, Company DCD came up with a new plan to help the comic book stores to expand.
The cost of opening a new store has to make a lot of investment to fill the shelves with the inventory of the merchandise. The company must look at the inflows and outflows to make the relevant decisions.
To calculate: The
Introduction:
Net present value (NPV):
It is the difference between the present value of
Internal rate of return:
It is a method to calculate the profitability of the potential investments. It is a discount rate which makes the net present value as zero.
a)
Expert Solution
Explanation of Solution
Given information:
Investment = $400,000
Cashflow = $62,000
Tax rate = 35%
Calculation of after-tax annual cash flow:
After-tax cash flow in terminal year:
Calculation of NPV and IRR:
Formula:
b)
Summary Introduction
To calculate: The net
Introduction:
Net present value (NPV):
It is the difference between the present value of cash inflows and cash outflows within a period of time.
Internal rate of return:
It is a method to calculate the profitability of the potential investments. It is a discount rate which makes the net present value as zero.
b)
Expert Solution
Explanation of Solution
Given information:
Investment = $300,000
Cashflow = $62,000
Tax rate = 35%
Calculation of after-tax annual cash flow:
After-tax cash flow in terminal year:
Calculation of NPV and IRR:
Formula:
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Chapter 11 Solutions
Principles of Managerial Finance (14th Edition) (Pearson Series in Finance)
Ch. 11.1 - Prob. 1FOECh. 11.1 - Prob. 11.1RQCh. 11.1 - What three types of net cash flows may exist for a...Ch. 11.1 - Prob. 11.3RQCh. 11.1 - Prob. 11.4RQCh. 11.1 - Prob. 1GFCh. 11.2 - Explain how to use each of the following inputs to...Ch. 11.2 - Prob. 11.6RQCh. 11.2 - Prob. 11.7RQCh. 11.2 - Prob. 11.8RQ
Ch. 11.3 - Prob. 11.9RQCh. 11.3 - Prob. 11.10RQCh. 11.4 - Explain how the terminal cash flow is calculated...Ch. 11 - Prob. 1ORCh. 11 - Book value, taxes, and initial investment Irvin...Ch. 11 - If Halley Industries reimburses employees who earn...Ch. 11 - Iridium Corp. has spent 3.5 billion over the past...Ch. 11 - Prob. 11.3WUECh. 11 - Prob. 11.4WUECh. 11 - Prob. 11.5WUECh. 11 - Prob. 11.1PCh. 11 - Prob. 11.2PCh. 11 - Prob. 11.3PCh. 11 - Sunk costs and opportunity costs Masters Golf...Ch. 11 - Prob. 11.5PCh. 11 - Prob. 11.6PCh. 11 - Prob. 11.7PCh. 11 - Book value and taxes on sale of assets Troy...Ch. 11 - Prob. 11.9PCh. 11 - Prob. 11.10PCh. 11 - Calculating initial investment Vastine Medical...Ch. 11 - Prob. 11.12PCh. 11 - Prob. 11.13PCh. 11 - Prob. 11.14PCh. 11 - Prob. 11.15PCh. 11 - Prob. 11.16PCh. 11 - Prob. 11.17PCh. 11 - Prob. 11.18PCh. 11 - Prob. 11.19PCh. 11 - Prob. 11.20PCh. 11 - Prob. 11.21PCh. 11 - Prob. 11.22PCh. 11 - Prob. 11.23PCh. 11 - Net cash flows: No terminal value Central Laundry...Ch. 11 - Prob. 11.25PCh. 11 - Ethics Problem Cash flow projections are a central...
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