we will use discount factor PRESENT VALUE OF $1 for n = 1 year i = 6%
= [1/1.06]1
=0.943
Year 0 | ||
Cash received | 34,500 | 69000*1/2 |
Tax cost | -8625 | 25% |
Net cash flow | 25875 | 34500-8625 |
Year 1 | ||
Cash received | 34500 | |
Tax cost | -12075 | 35% |
Net cash flow | 22425 | |
discount factor(6%) | 0.943 | |
Present value of year 1 cash flow | 21147 | [22425*0.943] |
NPV | 47,022 | [25875+21147] |
req b.
Year 0 | ||
Cash paid | -34,500 | 69000*1/2 |
Tax cost | 10695 |
31% |
Net cash flow | -23805 | -34500+10695 |
Year 1 | ||
Cash paid | -34500 | |
Tax cost | 10695 | 31% |
Net cash flow | -23805 | |
discount factor(6%) | 0.943 | |
Present value of year 1 cash flow | -22448 | [23805*0.943] |
NPV | -46253 | [23805+22448] |
req c-1
restructured to leslie | ||
Year 0 | ||
Cash received |
48000 |
|
Tax cost | -12000 | 25%*48000 |
Net cash flow | 36000 |
48000-12000 |
Year 1 | ||
Cash received | 18000 | |
Tax cost | -6300 | 35%*18000 |
Net cash flow | 11700 | |
discount factor(6%) | 0.943 | |
Present value of year 1 cash flow | 11033 | [11700*0.943] |
NPV | 47033 | [36000+11033] |
restructured for french | ||
Year 0 | ||
Cash paid | -48000 | |
Tax cost | 14880 |
31% |
Net cash flow | -33120 | -48000+14880 |
Year 1 | ||
Cash paid | -18000 | |
Tax cost | 5580 | 31% |
Net cash flow | -12420 | |
discount factor(6%) | 0.943 | |
Present value of year 1 cash flow | -11712 | [-12420*0.943] |
NPV | -44832 |
REQC-2
yes both the company are better off with option c1 as the cash outflow of french reduces and cash inflow of leslie increases.
French Corporation wishes to hire Leslie as a consultant to design a comprehensive staff training program....
please answer this in the same
format.
9 French Corporation wishes to hire Leslie as a consultant to design a comprehensive staff training program. The project is expected to take one year, and the parties have agreed to a tentative price of $68,000. French Corporation has proposed payment of one-half of the fee now, with the remainder paid in one year when the project is complete. Use Appendix A and Appendix B. 5 a. If Leslie expects her marginal tax...
Firm B wants to hire Mrs. X to manage its advertising department. The firm offered Mrs. X a three-year employment contract under which it will pay her an $104,000 annual salary in years 0, 1, and 2. Mrs. X projects that her salary will be taxed at a 25 percent rate in year 0 and a 40 percent rate in years 1 and 2. Firm B's tax rate for the three-year period is 34 percent. Use Appendix A and Appendix...
Firm B wants to hire Mrs. X to manage its advertising department. The tirm offered Mrs. X a three-year employment contract under which it will pay her an $95,000 annual salary in years 0, 1, and 2. Mrs. X projects that her salary will be taxed at a 25 percent rate in year O and a 40 percent rate in years 1 and 2. Firm B's tax rate for the three-year period is 34 percent. Use Appendix A and Appendix...
Firm B wants to hire Mrs. X to manage its advertising department. The firm offered Mrs. X a three-year employment contract under which it will pay her an $105,000 annual salary in years 0, 1, and 2. Mrs. X projects that her salary will be taxed at a 25 percent rate in year and a 40 percent rate in years 1 and 2. Firm B's tax rate for the three-year period is 30 percent. Use Appendix A and Appendix B....
Please redo whole problem 5)You are a consultant to a mid-sized manufacturing corporation that is considering an investment project. The project requires an initial investment of $100 million and will generate an after tax cash of $20 million in the first year and the cash flow will increase 5% thereafter every year (Please note that this is a constant growing cash flow).The project’s beta is 1.5. Assuming that rf=5% and E ( rM ) = 12%, Please answer the following...
You are a consultant to a large manufacturing corporation that is considering a project with the following net after-tax cash flows (in millions of dollars): Years from Now 0 1-10 After-Tax Cash Flow –75 18 The project's beta is 1.1. a. Assuming that re = 6% and Elrm) = 16%, what is the net present value of the project? (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.) Net present value b. What is...
You are a consultant to a large manufacturing corporation that is considering a project with the following net after-tax cash flows (in millions of dollars): Years from Now After-Tax Cash Flow 0 –65 1–10 15 The project's beta is 1.6. a. Assuming that rf = 6% and E(rM) = 13%, what is the net present value of the project? b. What is the highest possible beta estimate for the project before its NPV becomes negative?
(Related to Checkpoint 12.1) (Comprehensive problem-calculating project cash flows, NPV, PI, and IRR) Traid Winds Corporation, a firm in the 31 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. Given the following information, , determine the...
(Related to Checkpoint 12.1) (Comprehensive problem-calculating project cash flows, NPV, PI, and IRR) Traid Winds Corporation, a firm in the 30 percent marginal tax bracket with a required rate of return or discount rate of 10 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. Given the following information, determine the free...
(Related to Checkpoint 12.1) (Comprehensive problem-calculating project cash flows, NPV, PI, and IRR) Traid Winds Corporation, a firm in the 30 percent marginal tax bracket with a required rate of return or discount rate of 10 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. Given the following information, determine the free...