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Finance Question problems




Question;Briarcrest;Condiments is a spice-making firm. Recently, it developed a new process for;producing spices. The process requires new machinery that would cost;$2,297,575. have a life of five years, and would produce the cash flows shown;in the following table.;Year;Cash Flow;1;$418,402;2;-212,817;3;704,348;4;687,156;5;545,456;What is the NPV if the discount rate is 14.88 percent?(Enter negative amounts using negative sign e.g. -45.25. Round;answer to 2 decimal places, e.g. 15.25.);NPV is;$;Archer Daniels Midland Company is considering buying a new farm;that it plans to operate for 10 years. The farm will require an initial;investment of $11.90 million. This investment will consist of $2.20 million for;land and $9.70 million for trucks and other equipment. The land, all trucks;and all other equipment is expected to be sold at the end of 10 years at a;price of $5.15 million, $2.07 million above book value. The farm is expected to;produce revenue of $2.04 million each year, and annual cash flow from;operations equals $1.94 million. The marginal tax rate is 35 percent, and the;appropriate discount rate is 10 percent. Calculate the NPV of this investment.(Round intermediate calculations and final answer to 2 decimal;places, e.g. 15.25.);NPV;The project should be.;Accepted/rejected?;Bell Mountain Vineyards is considering updating its current manual;accounting system with a high-end electronic system. While the new accounting;system would save the company money, the cost of the system continues to;decline. The Bell Mountain?s opportunity cost of capital is 13.6 percent, and;the costs and values of investments made at different times in the future are;as follows;Year;Cost;Value of Future Savings;(at time of purchase);0;$5,000;$7,000;1;4,400;7,000;2;3,800;7,000;3;3,200;7,000;4;2,600;7,000;5;2,000;7,000;Calculate the NPV of each choice.(Round;answers to the nearest whole dollar, e.g. 5,275.);The NPV of each choice is;NPV0 = $;Suggest when should Bell Mountain buy the new accounting system?;Bell;Mountain should purchase the system inyear 2;year 3;year 5;year 4;year 1.;Chip?s Home Brew Whiskey management forecasts that if the firm;sells each bottle of Snake-Bite for $20, then the demand for the product will;be 15,000 bottles per year, whereas sales will be 94 percent as high if the;price is raised 9 percent. Chip?s variable cost per bottle is $10, and the;total fixed cash cost for the year is $100,000. Depreciation and amortization;charges are $20,000, and the firm has a 30 percent marginal tax rate.;Management anticipates an increased working capital need of $3,000 for the;year. What will be the effect of the price increase on the firm?s FCF for the;year?(Round answers to nearest whole dollar, e.g. 5,275.);At $20 per bottle the Chip?s FCF is $;and at the new price Chip?s FCF is $.;Capital Co. has a capital structure, based on current market;values, that consists of 50 percent debt, 9 percent preferred stock, and 41;percent common stock. If the returns required by investors are 10 percent, 11;percent, and 19 percent for the debt, preferred stock, and common stock, respectively;what is Capital?s after-tax WACC? Assume that the firm?s marginal tax rate is;40 percent.(Round intermediate calculations to 4 decimal;places, e.g. 1.2514 and final answer to 2 decimal places, e.g. 15.25%.);After tax WACC;=;%


Paper#47900 | Written in 18-Jul-2015

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