I | Initial Cash flow : | |||||
Cost of Machine Value | ($1,000,000) | |||||
Initial net working capital investment | $0 | |||||
--------------- | ||||||
Net Cash Outflow | ($1,000,000) | |||||
--------------- | ||||||
II | Operating Cash Flow: | |||||
Revenue | (40000*$20 per unit) | $800,000 | ||||
Less: Operating Expenses: | ||||||
Fixed expenses | $35,000 | |||||
Variable cost | $200,000 | |||||
(40000*$5) | --------------- | ($235,000) | ||||
--------------- | ||||||
Profit Before depreciation and Tax | $565,000 | |||||
Less: Depreciation | ($257,500) | |||||
(cost of project - salvage value)/ useful life | ||||||
--------------- | ||||||
Profit Before Tax | $307,500 | |||||
Less: Tax rate @ 25% | ($73,800) | |||||
--------------- | ||||||
Profit After Tax | $233,700 | |||||
Add : Depreciation | $257,500 | |||||
--------------- | ||||||
Operating Cash Flow After Tax | $491,200 | |||||
--------------- | ||||||
Terminal Cash Flow: | ||||||
Salvage value of project at the end | $30,000 | |||||
Solution : | a) Calculation Of NPV: | |||||
Year | Cash Flow | Return rate @ 14% | Discounted CF | |||
1 | $491,200 | 0.877192982 | $430,877.19 | |||
2 | $491,200 | 0.769467528 | $377,962.45 | |||
3 | $491,200 | 0.674971516 | $331,546.01 | |||
4 | $491,200 | 0.592080277 | $290,829.83 | |||
4 | $30,000 | 0.592080277 | $17,762.41 | |||
------------------- | ||||||
Discounted Cash Inflow (DCIF) | $1,448,977.89 | |||||
Less : | Discounted Cash Outflow (DCOF) | ($1,000,000.00) | ||||
------------------- | ||||||
NPV | $448,977.89 | |||||
------------------- | ||||||
IRR : | ||||||
Year | Cash Flow | Return rate @ 32% | Discounted CF | Return rate @ 35% | Discounted CF | |
1 | $491,200 | 0.757575758 | $372,121.21 | 0.740740741 | $363,851.85 | |
2 | $491,200 | 0.573921028 | $281,910.01 | 0.548696845 | $269,519.89 | |
3 | $491,200 | 0.434788658 | $213,568.19 | 0.406442107 | $199,644.36 | |
4 | $491,200 | 0.329385347 | $161,794.08 | 0.301068228 | $147,884.71 | |
4 | $30,000 | 0.329385347 | $9,881.56 | 0.301068228 | $9,032.05 | |
$1,039,275.05 | $989,932.87 | |||||
at 32% | DCF = $1039275.05 | |||||
at 35% | DCF = $989932.87 | |||||
at what rate DCF is $1000000 ? | 3% | ? | ||||
49342.18 | 39275.05 | |||||
2.387919423 | ||||||
IRR | 32%+2.387919423 | |||||
IRR = 34.387919423 |
market premium 5.4 25P20 101 pdf - Adobe Acrobat Reader DC indow Help 5 Chapter 13...
hanex limited is considering investing $50,000/- in a new machine with an expected life life of 5 years. the machine will have no scrap value at the end of five years.it is expected that 2000 units will be sold each year at a selling price of $3.00 per unit, variables production cots are expected to be $1.65 per unit, while incremental fixed cost, mainly the wages of maintenance engineer are expected to be $10.000/- per year. Hanex limited uses a...
Ross corporation examines the introduction of a new product. The initial investment is estimated at 20 million. Furthermore, the net working capital requirements of the project requires are equal to 20% of the projected annual sales at the beginning of each year. The base scenario concerning the project assumes also the following Product selling price first year 45,000 per unit Variable costs first year 35,000 per unit Fixed costs first year 2 million After first year, price, variable and fixed...
Ross corporation examines the introduction of a new product. The initial investment is estimated at 20 million. Furthermore, the net working capital requirements of the project requires are equal to 20% of the projected annual sales at the beginning of each year. The base scenario concerning the project assumes also the following Product selling price first year 45,000 per unit Variable costs first year 35,000 per unit Fixed costs first year 2 million After first year, price, variable and fixed...
Please solve parts f through j.
We are considering the introduction of a new product. Currently we are in the 34 percent marginal tax bracket with a 15 percent required rate of return or cost of capital. This project is expected to last 5 years and then, because this is somewhat of a fad product, be terminated. The following information describes the new project: Cost of new plant and equipment: Shipping and installation costs: Sales price per unit: Variable cost...
Homework #12 -Chapter #13 i Submit Saved Help Save & Exit Check my work Derrick Iverson is a divisional manager for Holston Company. His annual pay raises are largely determined by his division's return on investment (ROI), which has been above 20% each of the last three years. Derrick is considering a capital budgeting project that would require a $3,300,000 investment in equipment with a useful life of five years and no salvage value. Holston Company's discount rate is 17%....
Workings to be in 4 decimal place
Answers to be in 4 decimal place
You must evaluate the purchase of a spectrometer for a firm. The base price is $140,000 and it would cost another $30,000 to modify the equipment for special use by the firm. The equipment will be depreciated to zero value over the 3 years using prime cost (straight line) method. The machine would be sold after 3 years for $60,000. The machine would require a $8,500...
f-Adobe Acrobat Reader DC Help Survey of Account x D 7101228 Analyze, Think, Communicate ATC 9-1 Business Applications Case Analyzing Kroger and Whole Foods El The following information relates to The Kroger Company for its 2015 and 2014 fiscal years, and Whole Foods Market, Inc. for its 2014 and 2013 fiscal years. THE KROGER COMPANY Selected Faancial Informaticn amounts n miion, except per share January 31, 015 s 8830 Propety and 710 / 1228 +) 200% 冏 THE KROGER COMPANY...
% P12-22 (similar to) 18 Question Help (Related to Checkpoint 12.1) (Comprehensive problem-calculating project cash flows, NPV, PI, and IRR) Traid Winds Corporation, a firm in the 33 percent marginal tax bracket with a required rate of return or discount rate of 12 percent, is considering a new project. This project involves the introduction of a new product. The project is expected to last 5 years and then, because this is somewhat of a fad product, it will be terminated....
5. The C Corporation, a firm in the 34 percent marginal tax bracket with a required rate of return or discount rate. This project involves the introduction product. This project is expected to last five years and then, because this is som of a fad product, it will be terminated. Given the following information, determine the this is somewhat net cash flows associated with the project, the project's net present value. Apply the appropriate decision criteria. Cost of new plant...
Question 2 Thunder Corporation, an amusement park, is considering a capital investment in a new exhibit. The exhibit would cost $117,571 and have an estimated useful We of 5 years. It can be sold for $60,000 at the end of that time. Amusement parks need to rotate exhibits to keep people interested. It is expected to increase net annual cash flows by $20,000. The company's borrowing rate is 8%. Its cost of capital is 10%. Click here to view PV...