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 net present value and the internal rate of return . 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.

Question

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Answer 1

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 net present value and the internal rate of return.

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.

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 annual cash flow=Cashflow×(1-Tax rate)=62,000×(1-35100)=$40,300

After-tax cash flow in terminal year:

After-tax cash flow=40,300+250,000=$290,300

Calculation of NPV and IRR:

Principles of Managerial Finance, Chapter 11, Problem 1OR , additional homework tip 1

Formula:

Principles of Managerial Finance, Chapter 11, Problem 1OR , additional homework tip 2

b)

Summary Introduction

To calculate: The net present value and the internal rate of return.

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 annual cash flow=Cashflow×(1-Tax rate)=62,000×(1-35100)=$40,300

After-tax cash flow in terminal year:

After-tax cash flow=40,300+150,000=$190,300

Calculation of NPV and IRR:

Principles of Managerial Finance, Chapter 11, Problem 1OR , additional homework tip 3

Formula:

Principles of Managerial Finance, Chapter 11, Problem 1OR , additional homework tip 4

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Answer 2

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 net present value and the internal rate of return.

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.

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 annual cash flow=Cashflow×(1-Tax rate)=62,000×(1-35100)=$40,300

After-tax cash flow in terminal year:

After-tax cash flow=40,300+250,000=$290,300

Calculation of NPV and IRR:

Principles of Managerial Finance, Chapter 11, Problem 1OR , additional homework tip 1

Formula:

Principles of Managerial Finance, Chapter 11, Problem 1OR , additional homework tip 2

b)

Summary Introduction

To calculate: The net present value and the internal rate of return.

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 annual cash flow=Cashflow×(1-Tax rate)=62,000×(1-35100)=$40,300

After-tax cash flow in terminal year:

After-tax cash flow=40,300+150,000=$190,300

Calculation of NPV and IRR:

Principles of Managerial Finance, Chapter 11, Problem 1OR , additional homework tip 3

Formula:

Principles of Managerial Finance, Chapter 11, Problem 1OR , additional homework tip 4

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Answer 3

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 net present value and the internal rate of return.

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.

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 annual cash flow=Cashflow×(1-Tax rate)=62,000×(1-35100)=$40,300

After-tax cash flow in terminal year:

After-tax cash flow=40,300+250,000=$290,300

Calculation of NPV and IRR:

Principles of Managerial Finance, Chapter 11, Problem 1OR , additional homework tip 1

Formula:

Principles of Managerial Finance, Chapter 11, Problem 1OR , additional homework tip 2

b)

Summary Introduction

To calculate: The net present value and the internal rate of return.

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 annual cash flow=Cashflow×(1-Tax rate)=62,000×(1-35100)=$40,300

After-tax cash flow in terminal year:

After-tax cash flow=40,300+150,000=$190,300

Calculation of NPV and IRR:

Principles of Managerial Finance, Chapter 11, Problem 1OR , additional homework tip 3

Formula:

Principles of Managerial Finance, Chapter 11, Problem 1OR , additional homework tip 4

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Answer 4

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 net present value and the internal rate of return.

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.

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 annual cash flow=Cashflow×(1-Tax rate)=62,000×(1-35100)=$40,300

After-tax cash flow in terminal year:

After-tax cash flow=40,300+250,000=$290,300

Calculation of NPV and IRR:

Principles of Managerial Finance, Chapter 11, Problem 1OR , additional homework tip 1

Formula:

Principles of Managerial Finance, Chapter 11, Problem 1OR , additional homework tip 2

b)

Summary Introduction

To calculate: The net present value and the internal rate of return.

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 annual cash flow=Cashflow×(1-Tax rate)=62,000×(1-35100)=$40,300

After-tax cash flow in terminal year:

After-tax cash flow=40,300+150,000=$190,300

Calculation of NPV and IRR:

Principles of Managerial Finance, Chapter 11, Problem 1OR , additional homework tip 3

Formula:

Principles of Managerial Finance, Chapter 11, Problem 1OR , additional homework tip 4

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Answer 5

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 net present value and the internal rate of return.

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.

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 annual cash flow=Cashflow×(1-Tax rate)=62,000×(1-35100)=$40,300

After-tax cash flow in terminal year:

After-tax cash flow=40,300+250,000=$290,300

Calculation of NPV and IRR:

Principles of Managerial Finance, Chapter 11, Problem 1OR , additional homework tip 1

Formula:

Principles of Managerial Finance, Chapter 11, Problem 1OR , additional homework tip 2

b)

Summary Introduction

To calculate: The net present value and the internal rate of return.

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 annual cash flow=Cashflow×(1-Tax rate)=62,000×(1-35100)=$40,300

After-tax cash flow in terminal year:

After-tax cash flow=40,300+150,000=$190,300

Calculation of NPV and IRR:

Principles of Managerial Finance, Chapter 11, Problem 1OR , additional homework tip 3

Formula:

Principles of Managerial Finance, Chapter 11, Problem 1OR , additional homework tip 4

Answer 6

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 net present value and the internal rate of return.

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.

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 annual cash flow=Cashflow×(1-Tax rate)=62,000×(1-35100)=$40,300

After-tax cash flow in terminal year:

After-tax cash flow=40,300+250,000=$290,300

Calculation of NPV and IRR:

Principles of Managerial Finance, Chapter 11, Problem 1OR , additional homework tip 1

Formula:

Principles of Managerial Finance, Chapter 11, Problem 1OR , additional homework tip 2

Answer 7

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 net present value and the internal rate of return.

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.

Answer 8

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 annual cash flow=Cashflow×(1-Tax rate)=62,000×(1-35100)=$40,300

After-tax cash flow in terminal year:

After-tax cash flow=40,300+250,000=$290,300

Calculation of NPV and IRR:

Principles of Managerial Finance, Chapter 11, Problem 1OR , additional homework tip 1

Formula:

Principles of Managerial Finance, Chapter 11, Problem 1OR , additional homework tip 2

Answer 9

a)

Expert Solution

Answer 10

a)

Expert Solution

Answer 11

Expert Solution

Answer 12

b)

Summary Introduction

To calculate: The net present value and the internal rate of return.

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 annual cash flow=Cashflow×(1-Tax rate)=62,000×(1-35100)=$40,300

After-tax cash flow in terminal year:

After-tax cash flow=40,300+150,000=$190,300

Calculation of NPV and IRR:

Principles of Managerial Finance, Chapter 11, Problem 1OR , additional homework tip 3

Formula:

Principles of Managerial Finance, Chapter 11, Problem 1OR , additional homework tip 4

Answer 13

b)

Summary Introduction

To calculate: The net present value and the internal rate of return.

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.

Answer 14

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 annual cash flow=Cashflow×(1-Tax rate)=62,000×(1-35100)=$40,300

After-tax cash flow in terminal year:

After-tax cash flow=40,300+150,000=$190,300

Calculation of NPV and IRR:

Principles of Managerial Finance, Chapter 11, Problem 1OR , additional homework tip 3

Formula:

Principles of Managerial Finance, Chapter 11, Problem 1OR , additional homework tip 4

Answer 15

b)

Expert Solution

Answer 16

b)

Expert Solution

Answer 17

Expert Solution

Answer 18

Ch. 11.1 - Prob. 1FOE Ch. 11.1 - Prob. 11.1RQ Ch. 11.1 - What three types of net cash flows may exist for a...Ch. 11.1 - Prob. 11.3RQ Ch. 11.1 - Prob. 11.4RQ Ch. 11.1 - Prob. 1GF Ch. 11.2 - Explain how to use each of the following inputs to...Ch. 11.2 - Prob. 11.6RQ Ch. 11.2 - Prob. 11.7RQ Ch. 11.2 - Prob. 11.8RQ

Explanation of Solution

Explanation of Solution

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