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Six Misc. Finance Questions

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Question;Question 1.Summer Tyme, Inc., is considering a new 3-year expansion project that requires an initial fixed assetinvestment of $2.700 million. The fixed asset will be depreciated straight-line to zero over its 3-year taxlife, after which time it will have a market value of $210,000. The project requires an initial investment innet working capital of $300,000. The project is estimated to generate $2,400,000 in annual sales, withcosts of $960,000. The tax rate is 34 percent and the required return on the project is 14 percent. TheNPV for this project is $. (Negative amount should be indicated by a minus sign. Round your answer to 2decimal places. (e.g., 32.16))Question 2.Summer Tyme, Inc., is considering a new three-year expansion project that requires an initial fixed assetinvestment of $3.0 million. The fixed asset falls into the three-year MACRS class (MACRS Table) and willhave a market value of $280,000 after three years. The project requires an initial investment in networking capital of $500,000. The project is estimated to generate $2,850,000 in annual sales, with costsof $1,160,000. The tax rate is 40 percent and the required return on the project is 12 percent. The netcash flow in Year 0 is $, the net cash flow in Year 1 is $, the net cash flow in Year 2 is $, and the net cashflow in Year 3 is $. The NPV for this project is $. (Negative amounts should be indicated by a minus sign.Round your answers to 2 decimal places. (e.g., 32.16))Question 3.Dog Up! Franks is looking at a new sausage system with an installed cost of $655,200. This cost will bedepreciated straight-line to zero over the project's 6-year life, at the end of which the sausage systemcan be scrapped for $100,800. The sausage system will save the firm $201,600 per year in pretaxoperating costs, and the system requires an initial investment in net working capital of $47,040. If the taxrate is 34 percent and the discount rate is 10 percent, the NPV of this project is $. (Negative amountshould be indicated by a minus sign. Round your answer to 2 decimal places. (e.g., 32.16))Question 4.value:4.76 pointsConsider an asset that costs $413,600 and is depreciated straight-line to zero over its 9-year tax life. Theasset is to be used in a 3-year project, at the end of the project, the asset can be sold for $51,700. If therelevant tax rate is 33 percent, the aftertax cash flow from the sale of this asset is $. (Round your answerto 2 decimal places. (e.g., 32.16))Question 5.Geary Machine Shop is considering a four-year project to improve its production efficiency. Buying a newmachine press for $979,200 is estimated to result in $326,400 in annual pretax cost savings. The pressfalls in the MACRS five-year class (MACRS Table), and it will have a salvage value at the end of the projectof $142,800. The press also requires an initial investment in spare parts inventory of $40,800, along withan additional $6,120 in inventory for each succeeding year of the project. If the shop's tax rate is 32percent and its discount rate is 17 percent, the NPV for the project is $ and Geary buy and install themachine press. (Negative amount should be indicated by a minus sign. Round your answer to 2 decimalplaces. (e.g., 32.16))Question 6.Consider the following income statement:Required:(a) Fill in the missing numbers. (Round your taxes and net income to 2 decimal places. (e.g., 32.16))SalesCostsDepreciationEBTTaxes (34%)Net income$456,200296,80067,500$$(b) Calculate the OCF. (Round your answer to 2 decimal places. (e.g., 32.16))(c) What is the depreciation tax shield?

 

Paper#47986 | Written in 18-Jul-2015

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