Lander Company has an opportunity to pursue a capital budgeting project with a five-year time horizon....
Lander Company has an opportunity to pursue a capital budgeting project with a five-year time horizon. After careful study, Lander estimated the following costs and revenues for the project:
| Cost of equipment needed | $ | 280,000 | ||||
| Working capital needed | $ | 65,000 | ||||
| Repair the equipment in two years | $ | 20,500 | ||||
| Annual revenues and costs: | ||||||
| Sales revenues | $ | 400,000 | ||||
| Variable expenses | $ | 205,000 | ||||
| Fixed out-of-pocket operating costs | $ | 90,000 | ||||
The piece of equipment mentioned above has a useful life of five years and zero salvage value. Lander uses straight-line depreciation for financial reporting and tax purposes. The company’s tax rate is 30% and its after-tax cost of capital is 12%. When the project concludes in five years the working capital will be released for investment elsewhere within the company
Click here to view Exhibit 13B-1 and Exhibit 13B-2, to determine the appropriate discount factor(s) using tables.
Required:
1. Calculate the annual income tax expense for each of years 1 through 5 that will arise as a result of this investment opportunity.
2. Calculate the net present value of this investment opportunity. (Negative amounts should be indicated by a minus sign. Round your final answer to nearest whole dollar.)
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Lander Company has an opportunity to pursue a capital budgeting
project with a five-year time horizon....
Lander Company has an opportunity to pursue a capital budgeting project with a five-year time horizon....
Lander Company has an opportunity to pursue a capital budgeting project with a five-year time horizon. After careful study, Lander estimated the following costs and revenues for the project: $260,000 $ 63,000 $ 19,500 Cost of equipment needed Working capital needed Repair the equipment in two years Annual revenues and costs: Sales revenues Variable expenses Fixed out-of-pocket operating costs $380,000 $195,000 $ 86,999 The piece of equipment mentioned above has a useful life of five years and zero salvage value....
Lander Company has an opportunity to pursue a capital budgeting project with a five-year time hor...
Lander Company has an opportunity to pursue a capital budgeting project with a five-year time horizon. After careful study, Lander estimated the following costs and revenues for the project: Cost of equipment needed $ 290,000 Working capital needed $ 66,000 Repair the equipment in two years $ 21,000 Annual revenues and costs: Sales revenues $ 410,000 Variable expenses $ 210,000 Fixed out-of-pocket operating costs $ 92,000 The piece of equipment mentioned above has a useful life of five years and...
Lander Company has an opportunity to pursue a capital budgeting project with a five-year time horizon....
Lander Company has an opportunity to pursue a capital budgeting project with a five-year time horizon. After careful study, Lander estimated the following costs and revenues for the project: $310,000 $ 68,000 $ 22.000 Cost of equipment needed Working capital needed Repair the equipment in two years Annual revenues and costs Sales revenues Variable expenses Fixed out-of-pocket operating costs $430,000 $220,000 $ 96,000 The piece of equipment mentioned above has a useful life of five years and zero salvage value....
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Oakmont Company has an opportunity to manufacture and sell a new product for a four-year period....
Oakmont Company has an opportunity to manufacture and sell a new product for a four-year period. The company’s discount rate is 18%. After careful study, Oakmont estimated the following costs and revenues for the new product: Cost of equipment needed $ 270,000 Working capital needed $ 85,000 Overhaul of the equipment in year two $ 8,000 Salvage value of the equipment in four years $ 12,500 Annual revenues and costs: Sales revenues $ 410,000 Variable expenses $ 200,000 Fixed out-of-pocket...
Oakmont Company has an opportunity to manufacture and sell a new product for a four-year period....
Oakmont Company has an opportunity to manufacture and sell a new product for a four-year period. The company's discount rate is 15%. After careful study, Oakmont estimated the following costs and revenues for the new product: $ 145,000 63,000 9,500 13,500 Cost of equipment needed Working capital needed Overhaul of the equipment in year two Salvage value of the equipment in four years Annual revenues and costs: $ 280,000 $ 135,000 $ 73,000 Sales revenues Variable expenses Fixed out-of-pocket operating...
Winthrop Company has an opportunity to manufacture and sell a new product for a five-year period....
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Oakmont Company has an opportunity to manufacture and sell a new product for a four-year period....
Oakmont Company has an opportunity to manufacture and sell a new product for a four-year period. The company’s discount rate is 18%. After careful study, Oakmont estimated the following costs and revenues for the new product: Cost of equipment needed $ 220,000 Working capital needed $ 81,000 Overhaul of the equipment in year two $ 7,500 Salvage value of the equipment in four years $ 10,500 Annual revenues and costs: Sales revenues $ 370,000 Variable expenses $ 180,000 Fixed out-of-pocket...
Oakmont Company has an opportunity to manufacture and sell a new product for a four-year period....
Oakmont Company has an opportunity to manufacture and sell a new product for a four-year period. The company's discount rate is 18%. After careful study, Oakmont estimated the following costs and revenues for the new product: Cost of equipment needed Working capital needed Overhaul of the equipment in two years Salvage value of the equipment in four years $ 270,000 $ 85,000 $ 8,000 $ 12,500 Annual revenues and costs: Sales revenues Variable expenses Fixed out-of-pocket operating costs $410,000 $...
Lander Company has an opportunity to pursue a capital budgeting project with a five-year time horizon. After careful study, Lander estimated the following costs and revenues for the project: $260,000 $ 63,000 $ 19,500 Cost of equipment needed Working capital needed Repair the equipment in two years Annual revenues and costs: Sales revenues Variable expenses Fixed out-of-pocket operating costs $380,000 $195,000 $ 86,999 The piece of equipment mentioned above has a useful life of five years and zero salvage value....
Lander Company has an opportunity to pursue a capital budgeting project with a five-year time horizon. After careful study, Lander estimated the following costs and revenues for the project: $310,000 $ 68,000 $ 22.000 Cost of equipment needed Working capital needed Repair the equipment in two years Annual revenues and costs Sales revenues Variable expenses Fixed out-of-pocket operating costs $430,000 $220,000 $ 96,000 The piece of equipment mentioned above has a useful life of five years and zero salvage value....
Oakmont Company has an opportunity to manufacture and sell a new product for a four-year period. The company's discount rate is 17%. After careful study, Oakmont estimated the following costs and revenues for the new product: Cost of equipment needed Working capital needed Overhaul of the equipment in year two Salvage value of the equipment in four years $ 275,000 $ 86,000 $ 10,000 $ 13,000 Annual revenues and costs: Sales revenues Variable expenses Fixed out-of-pocket operating costs $ 420,000...
Oakmont Company has an opportunity to manufacture and sell a new product for a four-year period. The company's discount rate is 15%. After careful study, Oakmont estimated the following costs and revenues for the new product: $ 145,000 63,000 9,500 13,500 Cost of equipment needed Working capital needed Overhaul of the equipment in year two Salvage value of the equipment in four years Annual revenues and costs: $ 280,000 $ 135,000 $ 73,000 Sales revenues Variable expenses Fixed out-of-pocket operating...
Oakmont Company has an opportunity to manufacture and sell a new product for a four-year period. The company's discount rate is 18%. After careful study, Oakmont estimated the following costs and revenues for the new product: Cost of equipment needed Working capital needed Overhaul of the equipment in two years Salvage value of the equipment in four years $ 270,000 $ 85,000 $ 8,000 $ 12,500 Annual revenues and costs: Sales revenues Variable expenses Fixed out-of-pocket operating costs $410,000 $...
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