Gitman: Principl Manageri Finance_15 (15th Edition) (What's New in Finance)
15th Edition
ISBN: 9780134476315
Author: Chad J. Zutter, Scott B. Smart
Publisher: PEARSON
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Chapter 4, Problem 4.4P
Learning Goals 2, 3
P4-4
| Accruals | $ 15,000 |
| Current assets | 120,000 |
| Interest expense | 15,000 |
| Sales revenue | 400,000 |
| Inventory | 70,000 |
| Total costs before depreciation, interest, and taxes | 290,000 |
| Tax rate on ordinary income | 40% |
- a. Use the relevant data to determine the operating cash flow (see Equations 4.2 and 4.3) for the current year.
- b. Explain the impact that depreciation, as well as any other noncash charges, has on a firm’s cash flows.
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Net present value method
The following data are accumulated by Geddes Company in evaluating the purchase of $140,000 of equipment, having a four-year useful life:
Net Income
Net Cash Flow
Year 1
$42,500
$77,500
Year 2
21,500
56,500
Year 3
15,500
50,500
Year 4
6,500
41,500
This information has been collected in the Microsoft Excel Online file. Open the spreadsheet, perform the required analysis, and input your answers in the questions below.
Assuming that the desired rate of return is 6%, determine the net present value for the proposal. If required, round to the nearest dollar.
Net present value
$fill in the blank 2
Would management be likely to look with favor on the proposal?
, the net present value indicates that the return on the proposal is than the minimum desired rate of return of 6%.
show solution using excel formula
Filling in where “?” Are present
Chapter 4 Solutions
Gitman: Principl Manageri Finance_15 (15th Edition) (What's New in Finance)
Ch. 4.1 - Prob. 4.1RQCh. 4.1 - Prob. 4.2RQCh. 4.2 - Briefly describe the first four modified...Ch. 4.2 - Describe the overall cash flow through the firm in...Ch. 4.2 - Prob. 4.5RQCh. 4.2 - 4-B Why is depreciation (as well as amortization...Ch. 4.2 - Prob. 4.7RQCh. 4.2 - Prob. 4.8RQCh. 4.2 - Prob. 4.9RQCh. 4.3 - Prob. 4.10RQ
Ch. 4.3 - Prob. 4.11RQCh. 4.3 - Prob. 4.12RQCh. 4.3 - What is the cause of uncertainty in the cash...Ch. 4.4 - Prob. 4.14RQCh. 4.5 - Prob. 4.15RQCh. 4.5 - Prob. 4.16RQCh. 4.6 - Prob. 4.17RQCh. 4.6 - What is the significance of the plug figure,...Ch. 4.7 - Prob. 4.19RQCh. 4.7 - Prob. 4.20RQCh. 4 - Opener-in-Review The chapter opener described a...Ch. 4 - Learning Goals 2, 3 ST4-1 Depreciation and cash...Ch. 4 - Prob. 4.2STPCh. 4 - Prob. 4.3STPCh. 4 - Prob. 4.1WUECh. 4 - Prob. 4.2WUECh. 4 - Learning Goal 3 E4-3 Determine the operating cash...Ch. 4 - Prob. 4.4WUECh. 4 - Learning Goal 5 E4-5 Rimier Corp. forecasts sales...Ch. 4 - Prob. 4.1PCh. 4 - Learning Goal 2 P4-2 Depreciation In early 2019,...Ch. 4 - Prob. 4.3PCh. 4 - Learning Goals 2, 3 P4-4 Depreciation and...Ch. 4 - Learning Goal 3 P4-5 Classifying inflows and...Ch. 4 - Prob. 4.6PCh. 4 - Learning Goal 4 P4-8 Cash receipts A firm has...Ch. 4 - Learning Goal 4 P4-9 Cash disbursements schedule...Ch. 4 - Learning Goal 4 P4-10 Cash budget: Basic Grenoble...Ch. 4 - Prob. 4.11PCh. 4 - Learning Goal 4 P4-12 Cash budget: Advanced The...Ch. 4 - Prob. 4.13PCh. 4 - Prob. 4.14PCh. 4 - Learning Goal 4 P4-15 Multiple cash budgets:...Ch. 4 - Learning Goal 5 P4-16 Pro forma income statement...Ch. 4 - Learning Goal 5 P4-17 Pro forma income statement:...Ch. 4 - Learning Goal 5 P4-18 Pro forma balance sheet:...Ch. 4 - Learning Goal 5 P4-19 Pro forma balance sheet...Ch. 4 - Learning Goal 5 P4-20 Integrative: Pro forma...Ch. 4 - Learning Goal 5 P4-21 Integrative: Pro forma...Ch. 4 - Prob. 4.22PCh. 4 - Prob. 1SE
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- Net present value method The following data are accumulated by Geddes Company in evaluating the purchase of $130,000 of equipment, having a four-year useful life: Net Income Net Cash Flow Year 1 $46,000 $78,500 Year 2 29,000 61,500 Year 3 11,000 43,500 Year 4 5,000 37,500 This information has been collected in the Microsoft Excel Online file. Open the spreadsheet, perform the required analysis, and input your answers in the questions below. Assuming that the desired rate of return is 10%, determine the net present value for the proposal. If required, round to the nearest dollar. Net present value $ Would management be likely to look with favor on the proposal? Yes , the net present value indicates that the return on the proposal is greater than the minimum desired rate of return of 10%.arrow_forwardI need help solving this questionarrow_forwardFilling in where “?” Arearrow_forward
- Net present value method The following data are accumulated by Geddes Company in evaluating the purchase of $160,000 of equipment, having a four-year useful life: Net Income Net Cash Flow Year 1 $50,000 $90,000 Year 2 22,000 62,000 Year 3 11,500 51,500 Year 4 5,000 45,000 This information has been collected in the Microsoft Excel Online file. Open the spreadsheet, perform the required analysis, and input your answers in the questions below. Open spreadsheet Assuming that the desired rate of return is 20%, determine the net present value for the proposal. If required, round to the nearest dollar. Net present value $fill in the blank 2 Would management be likely to look with favor on the proposal? YesNo , the net present value indicates that the return on the proposal is greaterless than the minimum desired rate of return of 20%.arrow_forwardLearning Activity 1. Capital Budgeting Techniques Problem 1. Magtibay, Inc. is planning to acquire a new machine at a total cost of Php 360,000. The estimated life of the machine is six years with no salvage value. The straight-line method of depreciation will be used. Magtibay estimates that the annual cash flow from operations, before income taxes, from using the machine amounts to Php 90,000. Assume that Magtibay’s cost of capital is 8% and the income tax rate is 40%. The present vale of P1 at 8% for 6 years is 0.630. The present value of an annuity of P1 in arrears at 8% for 6 years is 4.623. Questions: What would be the payback period for the machine? What would be the net present value?arrow_forwardFilling in where “?” Are presentarrow_forward
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