Please use Excel for this question so that the solution can be displayed in a clear and organized manner. Your company is evaluating new equipment that will cost $1,000,000. The equipment is in the MACRS 3-year class and will be sold after 3 years for $100,000. Use of the equipment will increase net working capital by 100,00
Windschott Air Company (WAC) is a small business. It is deciding whether or not to replace an existing machine in its factory with a newer model machine. It has heard that you are a financial management student and is seeking your advice. WAC has provided the following information for you. The existing machine was purchase
Please provide in an excel file. Your company is evaluating new equipment that will cost $1,000,000. The equipment is in the MACRS 3-year class and will be sold after 3 years for $100,000. Use of the equipment will increae net working capital by 100,000. The equipment will save $450,000 per year in operating costs. The c
1. Bill Anders retires in 8 years. He has $650,000 to invest and is considering a franchise for a fast-food outlet. He would have to purchase equipment costing $500,000 to equip the outlet and invest an additional $150,000 for inventories and other working capital needs. Other outlets in the fast-food chain have an annual n
As an alternative to a lease, William and Bart Co. decided to buy a piece of equipment for $250,000, with a useful life of 10 years. Afterwards it can be sold for $20,000. Using the three year MACRS method for depreciation and William and Bart Co estimates cost of capital @ 12% and a tax rate of 20%. How do determine the net
49. Winona Miller, president of CLJ Products, is considering the purchase of a computer-aided manufacturing system that requires and initial investment of $4,000,000 and is estimated to have a useful life of 10 years, CLJ Products' cost of capital is currently 12 percent. The annual after-tax cash benefits/saving associated with
New asset $400,000 salvage value 30,000 old equpiment tax-basis 60,000 revenues 200,000 savings first three years @ 120,000 fourth year 90,000 tax rate 40% after-tax cost 10% A. What is the present value of the depreciation tax shield for the new asset for
Question1. Couch-potato Cable TV competes in a regional market of 5,000,000 cable users in the Pennsylvania area. Their price is $30 per month. They have achieved the following results and have the following objectives for their marketing program. Objective Actual Awareness .85 .77 Like
EXERCISES 1) Suppose the following accounts' balances for M&T Production Inc.: Accounts Periods X1 X2 Cash $50 $62 Inventory $25 $20 Account Receivable $20 $16 Supply $6 $12 Account Payable $10 $15 Notes Payables $30 $28 Sales $150 Cost of Goods Sold $70 Order Cost $50 Carrying Cost $20 A) Calculate the
Please show steps. A firm is considering the refunding of an outstanding 30-year bond issue. The original issue consists of $20 million in 12% callable bonds with $300,000 in flotation costs and a call premium of 10%. The firm can replace the old bonds now (10 years after the original issue date) with a new 20-year issue
You are analyzing a project with an initial cost of 48,000 pounds. The project is expected to return 11,000 pounds the first year, 36,000 pounds the second year and 38,000 pounds the third and final year. There is no salvage value. The current spot rate is 0.6211 pounds. The nominal return relevant to the project is 12 percent i
You are considering 2 independent projects with the following cash flows. The required return for both projects is 16 percent. Given this information which one of the following statements is correct? year Project A Project B 0 -$125,000 -$135,000
Assume you graph a project's net present value given various sales quantities. Which one of the following is correct regarding the resulting function? a. The steepness of the function relates to the projects degree of operating leverage. b. The steeper the function the less sensitive the project is to changes in the sales qu
9. Sorenson Stores is considering a project that has the following cash flows: Year Cash Flows (end of period) 1 $2,000 2 $3,000 3 $3,000 4
11. A highly risk-averse investor is considering adding one additional stock to a 3-stock portfolio, to form a 4-stock portfolio. The three stocks currently held all have b = 1.0, and they are perfectly positively correlated with the market. Potential new Stocks A and B both have expected returns of 15%, are in equilibrium, a
Discuss differences and similarities between sensitivity analysis and scenario analysis. Which method would you use if the purpose of analysis is to identify one or two key variables that have largest impact on the estimated NPV of a small project under consideration?
MBC Corporation is considering investing in a new project. The project has a life of 10 years requires an initial investment of $180,000. The fixed operating cost is expected to be $36,000 and variable cost is expected to be 40% of sales. The required rate of return is 11%. a) How much annual sales the project must produ
A 4-year project can be purchased for $10,000. Net cash benefits per year have an expected value of $4,000 and a standard deviation of $2,000. The required rate of return is 10%. a) Expected NPV of the project. b) Standard deviation of NPV assuming perfect correlation of cash flows. c) Standard deviation of
If competitors do not respond to a new product, there is a 0.9 probability of a positive net present value. If competitors do respond, there is a 0.4 probability of a positive net present value. There is a 0.8 probability that competitors will respond. What is the probability of a positive net present value?
Please see attached file. 1) What is the net investment required at t = 0? 2) What is the operating cash flow in Year 1? 3) What is the operating cash flow in Year 2? 4) What is the operating cash flow in Year 3? 5) What is the project's NPV? 6) After seeing your analysis, the president has asked to recalculate the NPV i
See attached file. Prepare an analysis of Rondo's new project. Use ONLY these assumptions for your analysis: 1. Project life is 5 years. 2. Initial investment is $6,250,000 for equipment invoice, transportation, and installation. 3. Worker training for operating new equipment is $15,000. 4. First ye
Which of the following methods determines the amount of the change a proposed project will have on the value of a firm? net present value discounted payback internal rate of return profitability index payback
See the attached file. Determine whether PowerCo should construct a new generator to meet an expected rise in demand for power. "PowerCo: Your Analysis and Report."
A company is considering the replacement of an existing machine. Develop the relevant cash flows to analyze the proposed replacement. Determine the net present value, the IRR of the proposal and make a recommendation to accept or reject the replacement proposal. What is the highest cost of capital that the firm could have and
The company's new project will generate the following cash flows at the end of each of the stated years: Year 2 543; Year 4 219; Year 7 879. If these cash flows are discounted at 12%, what is the sum of their present value? Show all calculations.
An investment costs $10,000 and offers annual cash inflow of $1,770 for ten years. According to both the net present value and internal rate of return methods of capital budgeting, should the firm make this investment if its cost of capital is (a) 10 percent or (b) 14 percent?
In business the calculation of the present value of a future rate of return is a critical piece of information. Why is this critical and what are some of the areas where the present value calculation is used in business? If you can, provide an example from your place of work or home
A taxi driver drives a taxi 50,000 miles a year. A new cab costs $12,000. He can drive the cab 200,000 miles with original engine and transmission. (It lasts longer than an ordinary car because he changes oil every 3,000 miles and because a taxi engine never gets cold, he explains.) Repair cost will average $0.04 a mile for the
A $1 million capital investment will generate cash flows of $700,000 at the end of each year for 2 years, after which it will be worthless. (a) Compute the net present value using a 10% required rate of return. (b) Assume depreciation of $600,000 the first year and $400,000 the second year, compute the economic profit fo
Please help with the following solution with step by step calculations. Calculate the net present value and profitability index of an uneven cash flow. Investment A Initial Investment is $180,325 Net cash flow year 1 = $45,000 year 2 = $50,000 year 3 = $82,295 year 4 = $86,400 year 5 = $64,000 Investment B