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I need a help in 5 financial problems. Can you guy...




I need a help in 5 financial problems. Can you guys help me with them? 1- Your firm purchased machinery with a 7-year MACRS life for $9 million. The project, however, will end after 4 years. If the equipment can be sold for $3.5 million at the completion of the project, and your firm?s tax rate is 30%, what is the after-tax cash flow from the sale of the machinery? Use MACRS depreciation schedule 2- Expenses are expected to be 40% of revenues, and working capital required in each year is expected to be 10% of revenues in the following year. The product requires an immediate investment of $53,000 in plant and equipment. a. If the plant and equipment are depreciated over 4 years to a salvage value of zero using straight-line depreciation, and the firm?s tax rate is 20%, what are the project cash flows in each year? (Enter your answers in thousands of dollars. Do not round intermediate calculations. b. If the opportunity cost of capital is 12%, what is project NPV? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. c. What is project IRR? 3- Blooper Industries must replace its magnoosium purification system. Quick & Dirty Systems sells a relatively cheap purification system for $8 million. The system will last 4 years. Do-It-Right sells a sturdier but more expensive system for $18 million; it will last for 9 years. Both systems entail $3 million in operating costs; both will be depreciated straight-line to a final value of zero over their useful lives; neither will have any salvage value at the end of its life. The firm?s tax rate is 30%, and the discount rate is 16%. a. Calculate the equivalent annual cost of each alternative ? Quick & Dirty ? Do-It-Right 4- The following table presents sales forecasts for Golden Gelt Giftware. The unit price is $30. The unit cost of the giftware is $10. Year Unit Sales 1 24,000 2 32,000 3 16,000 4 7,000 Thereafter 0 ________________________________________ It is expected that net working capital will amount to 30% of sales in the following year. For example, the store will need an initial (year-0) investment in working capital of .30 ? 24,000 ? $30 = $216,000. Plant and equipment necessary to establish the Giftware business will require an additional investment of $202,000. This investment will be depreciated using MACRS and a 3-year life. After 4 years, the equipment will have an economic and book value of zero. The firm?s tax rate is 20%. What is the net present value of the project? The discount rate is 12% 5- Bottoms Up Diaper Service is considering the purchase of a new industrial washer. It can purchase the washer for $7,750 and sell its old washer for $3,750. The new washer will last for 5 years and save $2,050 a year in expenses. The opportunity cost of capital is 14%, and the firm?s tax rate is 30%. What is the equivalent annual cost of the washer, if the firm uses straight-line depreciation?


Paper#10068 | Written in 18-Jul-2015

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