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9.31 It is necessary to evaluate the profitability of proposed improvements to a process prior to...
31. It is necessary to evaluate the profitability of proposed improvements to a process prior to...
31. It is necessary to evaluate the profitability of proposed improvements to a process prior to obtaining approval to implement changes. For one such process, the capital investment (end of year 0) for the project is $250,000. There is no salvage value. In years 1 and 2, you expect to generate an after-tax revenue from the project of S60,000/y. In years 3-8, you expect to generate an after-tax revenue of $50,000/y. Assume that the investments and cash flows are single...
35. For a new process, the land was purchased for S10 million. The fixed capital investment,...
35. For a new process, the land was purchased for S10 million. The fixed capital investment, paid at the end of year 0, is $165 million. The working capital is S15 million, and the salvage value is $15 million. The estimated revenue from years 1 through 10 is $70 million/y, and the estimated cost of manufacture over the same time period is $25 million/y. The internal hurdle rate (interest rate) is 14% p.a., before taxes, and the taxation rate is...
Problem 2 A proposed process (see table below) has a lifetime of 10 years and a...
Problem 2
A proposed process (see table below) has a lifetime of 10 years
and a total fixed capital investment of $60 million (to be
committed in equal parts over years 0 and 1). Just prior to startup
(end of year 1), a working capital of $25 million is required.
Projected annual revenues and operating expenses yield an annual
pre-tax cash flow of $50 million, however the plant is projected to
operate at 50% capacity in year 2. The 5-year...
Keith Urban Bookstores is considering a major expansion of its business. The details of the proposed...
Keith Urban Bookstores is considering a major expansion of its business. The details of the proposed expansion project are summarized below: The company will have to purchase $500,000 in equipment at t 0. This is the depreciable cost. . The project has an economic life of four years. . The cost can be depreciated on a MACRS 3-year basis, which implies the following depreciation schedule: MACRS Depreciation Year Rates 0.33 0.45 0.15 0.07 4 . At t 0, the project...
You must evaluate the purchase of a proposed spectrometer for the R&D department. The base price...
You must evaluate the purchase of a proposed spectrometer for the R&D department. The base price is $170,000, and it would cost another $34,000 to modify the equipment for special use by the firm. The equipment falls into the MACRS 3-year class and would be sold after 3 years for $51,000. The applicable depreciation rates are 33%, 45%, 15%, and 7%. The equipment would require a $13,000 increase in net operating working capital (spare parts inventory). The project would have...
The Greentree Lumber Company is attempting to evaluate the profitability of adding another cutting line to...
The Greentree Lumber Company is attempting to evaluate the profitability of adding another cutting line to its present sawmill operations. They would need to purchase two more acres of land for $30,000 (total). The equipment would cost$122,000 and could be depreciated over a five-year recovery period with the MACRS method. The new equipment is expected to increase gross revenue by $51,000 per year for five years, and operating expenses will be $14,000 annually for five years. It is expected that...
You must evaluate the purchase of a proposed spectrometer for the R&D department. The base price...
You must evaluate the purchase of a proposed spectrometer for the R&D department. The base price is $280,000, and it would cost another $42,000 to modify the equipment for special use by the firm. The equipment falls into the MACRS 3-year class and would be sold after 3 years for $140,000. The applicable depreciation rates are 33%, 45%, 15%, and 7%. The equipment would require an $5,000 increase in net operating working capital (spare parts inventory). The project would have...
NEW PROJECT ANALYSIS You must evaluate the purchase of a proposed spectrometer for the R&D department....
NEW PROJECT ANALYSIS You must evaluate the purchase of a proposed spectrometer for the R&D department. The base price is $190,000, and it would cost another $28,500 to modify the equipment for special use by the firm. The equipment falls into the MACRS 3-year class and would be sold after 3 years for $85,500. The applicable depreciation rates are 33%, 45%, 15%, and 7%. The equipment would require a $9,000 increase in net operating working capital (spare parts inventory). The...
NEW PROJECT ANALYSIS You must evaluate the purchase of a proposed spectrometer for the R&D department....
NEW PROJECT ANALYSIS You must evaluate the purchase of a proposed spectrometer for the R&D department. The base price is $110,000, and it would cost another $27,500 to modify the equipment for special use by the firm. The equipment falls into the MACRS 3-year class and would be sold after 3 years for $55,000. The applicable depreciation rates are 33%, 45%, 15%, and 7%. The equipment would require a $11,000 increase in net operating working capital (spare parts inventory). The...
NEW PROJECT ANALYSIS You must evaluate the purchase of a proposed spectrometer for the R&D department....
NEW PROJECT ANALYSIS You must evaluate the purchase of a proposed spectrometer for the R&D department. The base price is $190,000, and it would cost another $28,500 to modify the equipment for special use by the firm. The equipment falls into the MACRS 3-year class and would be sold after 3 years for $76,000. The applicable depreciation rates are 33%, 45%, 15%, and 7%. The equipment would require a $12,000 increase in net operating working capital (spare parts inventory). The...
31. It is necessary to evaluate the profitability of proposed improvements to a process prior to obtaining approval to implement changes. For one such process, the capital investment (end of year 0) for the project is $250,000. There is no salvage value. In years 1 and 2, you expect to generate an after-tax revenue from the project of S60,000/y. In years 3-8, you expect to generate an after-tax revenue of $50,000/y. Assume that the investments and cash flows are single...
35. For a new process, the land was purchased for S10 million. The fixed capital investment, paid at the end of year 0, is $165 million. The working capital is S15 million, and the salvage value is $15 million. The estimated revenue from years 1 through 10 is $70 million/y, and the estimated cost of manufacture over the same time period is $25 million/y. The internal hurdle rate (interest rate) is 14% p.a., before taxes, and the taxation rate is...
Problem 2
A proposed process (see table below) has a lifetime of 10 years
and a total fixed capital investment of $60 million (to be
committed in equal parts over years 0 and 1). Just prior to startup
(end of year 1), a working capital of $25 million is required.
Projected annual revenues and operating expenses yield an annual
pre-tax cash flow of $50 million, however the plant is projected to
operate at 50% capacity in year 2. The 5-year...
Keith Urban Bookstores is considering a major expansion of its business. The details of the proposed expansion project are summarized below: The company will have to purchase $500,000 in equipment at t 0. This is the depreciable cost. . The project has an economic life of four years. . The cost can be depreciated on a MACRS 3-year basis, which implies the following depreciation schedule: MACRS Depreciation Year Rates 0.33 0.45 0.15 0.07 4 . At t 0, the project...
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At a certain temperature, the ?pKp for the decomposition of
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