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Alyeska Salmon Inc. is considering a new automated production line. The project costs $500000 and is...
Alyeska Salmon Inc., a large salmon canning firm operating out of Valdez, Alaska, has a new automated production line project it is considering. The project has a cost of $367,000 and is expected to provide after-tax annual cash flows of $86,300 for eight years. The firm's management is uncomfortable with the IRR reinvestment assumption and prefers the modified IRR approach. You have calculated a cost of capital for the firm of 12 percent. What is the project's MIRR? Use the...
Graziano Corporation (GC) is considering a project to purchase new equipment. The equipment would be depreciated by the straight-line method over its 3-year life and would have a zero-salvage value. The project requires an investment of $6,000 today on net working capital. Revenues and other operating costs are expected to be constant over the project's 3-year life. However, this project would compete with other company’s products and would reduce its pre-tax annual cash flows of $5,000 per year. The investment...
Graziano Corporation (GC) is considering a project to purchase new equipment. The equipment would be depreciated by the straight-line method over its 3-year life and would have a zero-salvage value. The project requires an investment of $6,000 today on net working capital. Revenues and other operating costs are expected to be constant over the project's 3-year life. However, this project would compete with other company’s products and would reduce its pre-tax annual cash flows of $5,000 per year. The investment...
(New project analysis) Garcia's Truckin' Inc. is considering the purchase of a new production machine for $150,000. The purchase of this machine will result in an increase in earnings before interest and taxes of $40,000 per year. To operate the machine properly, workers would have to go through a brief training session that would cost $5,000 after taxes. It would cost$6,000 to install the machine properly. Also, because this machine is extremely efficient, its purchase would necessitate an increase in...
(New project analysis) Garcia's Truckin' Inc. is considering the purchase of a new production machine for $150,000. The purchase of this machine will result in an increase in earnings before interest and taxes of $60,000 per year. To operate the machine properly, workers would have to go through a brief training session that would cost $7,000 after taxes. It would cost $6,000 to install the machine properly. Also, because this machine is extremely efficient, its purchase would necessitate an increase...
New project analysis Garcia's Truckin' Inc. is considering the purchase of a new production machine for $300,000. The purchase of this machine will result in an increase in earnings before interest and taxes of $40,000 per year. To operate the machine properly, workers would have to go through a brief training session that would cost $7,000 after taxes. It would cost $4,000 to install the machine properly. Also, because this machine is extremely efficient, its purchase would necessitate an...
(New project analysis) Garcia's Truckin' Inc. is considering the purchase of a new production machine for $250,000.The purchase of this machine will result in an increase in earnings before interest and taxes of $60,000 per year. To operate the machine properly, workers would have to go through a brief training session that would cost $3,000 after taxes. It would cost $6,000 to install the machine properly. Also, because this machine is extremelyefficient, its purchase would necessitate an increase in inventory...
Summer Tyme, Inc., is considering a new 3-year expansion project that requires an initial fixed asset investment of $4.644 million. The fixed asset will be depreciated straight-line to zero over its 3-year tax life, after which time it will have a market value of $361,200. The project requires an initial investment in net working capital of $516,000. The project is estimated to generate $4,128,000 in annual sales, with costs of $1,651,200. The tax rate is 32 percent and the required...
Speedy Computers, Inc. is considering a new project that costs $50 million. The project will generate after-tax (year-end) cash flows or $8 million for ten years. The firm has a debt- to-equity ratio of 2/3. The equity beta for Speedy is 1.75. The expected return on the market is 12 percent and the risk- free rate is 4 percent. The cost of debt is 7.5 percent. corporate tax rate is 40 percent. The project has the same risk of the...
New-Project Analysis The Campbell Company is considering adding a robotic paint sprayer to its production line. The sprayer's base price is $810,000, and it would cost another $23,000 to install it. The machine falls into the MACRS 3-year class (the applicable MACRS depreciation rates are 33.33%, 44.45%, 14.81%, and 7.41%), and it would be sold after 3 years for $628,000. The machine would require an increase in net working capital (inventory) of $19,500. The sprayer would not change revenues, but...