You must evaluate the purchase of a proposedSpectrometer for R&D department. The purchase.Price of the spectrometer including modificationsis $200,000, and the equipment will bedepreciated at the time of purchase. Theequipment would be sold after 3 years for$51,000. The equipment would require a $15,000increase in net operating working capital(spare parts inventory). The project would haveno effect on revenues, but it should savefirm $49,000 per year in before-tax laber casts.The firm's marginal fecteral-plus-state tarrate is 25%a) What is the initial investment outlay for theSpectrumeter after bonus depreciation is considered,that is the Year 0 project cash flow?theEnteryour answer as aa positive value. Randanswer to the nearest dollar.$b.) What are the project's annual cash flows in YearsRound1, 2, and 3? Do not round intermediate calculations.your answers to the nearest dollar.Year 1: 9Year 2: $Year 3: $10 4your

Operating Cash flow is the amount which is earned by the investor from the project. It is the net…

You must evaluate the purchase of a proposed Spectrometer for R&D department. The purchase Price of the spectrometer including modifications is $200,000, and the equipment will be depreciated at the time of purchase. The I equipment would be sold after 3 years for $51,000. The equipment would require a $15,000 increase in net operating working capital (spare parts inventory). The project would have Y no effect on revenues, but it should save the firm $49,000 per year in before-tax labor casts. The firm's marginal fecteral-plus-state tax rate is 25% a) what is the initial investment outlay for the Spectrometer after bonus depreciation is considered, that is the Year 0 project cash flow? Enter your answer as a positive value. Rand your answer to the nearest dollar. $ b.) What are the project's amual cash flows in Years 1, 2, and 37 Do not round intermediate calculations. Round your answers to the nearest dollar. Year 1: 9 Year 2: $ Year 3: $

You must evaluate the purchase of a proposed Spectrometer for R&D department. The purchase Price of the spectrometer including modifications is $200,000, and the equipment will be depreciated at the time of purchase. The I equipment would be sold after 3 years for $51,000. The equipment would require a $15,000 increase in net operating working capital (spare parts inventory). The project would have Y no effect on revenues, but it should save the firm $49,000 per year in before-tax labor casts. The firm's marginal fecteral-plus-state tax rate is 25% a) what is the initial investment outlay for the Spectrometer after bonus depreciation is considered, that is the Year 0 project cash flow? Enter your answer as a positive value. Rand your answer to the nearest dollar. $ b.) What are the project's amual cash flows in Years 1, 2, and 37 Do not round intermediate calculations. Round your answers to the nearest dollar. Year 1: 9 Year 2: $ Year 3: $

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter19: Capital Investment

Section: Chapter Questions

Problem 10E: Roberts Company is considering an investment in equipment that is capable of producing more...

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Roberts Company is considering an investment in equipment that is capable of producing more efficiently than the current technology. The outlay required is 2,293,200. The equipment is expected to last five years and will have no salvage value. The expected cash flows associated with the project are as follows: Required: 1. Compute the projects payback period. 2. Compute the projects accounting rate of return. 3. Compute the projects net present value, assuming a required rate of return of 10 percent. 4. Compute the projects internal rate of return.
As a financial analyst, you must evaluate a proposed project to produce printer cartridges. The purchase price of the equipment, including installation, is $65,000, and the equipment will be fully depreciated at t = 0. Annual sales would be 4,000 units at a price of $50 per cartridge, and the project’s life would be 3 years. Current assets would increase by $5,000 and payables by $3,000. At the end of 3 years, the equipment could be sold for $10,000. Variable costs would be 70% of sales revenues, fixed costs would be $30,000 per year, the marginal tax rate is 25%, and the corporate WACC is 11%. Management is uncertain about the exact unit sales. What would the project’s NPV be if unit sales turned out to be 20% below forecast, but other inputs were as forecasted? Would this change the decision? NPV = $ Accept or Reject? project
As a financial analyst, you must evaluate a proposed project to produce printer cartridges. The purchase price of the equipment, including installation, is $65,000, and the equipment will be fully depreciated at t = 0. Annual sales would be 4,000 units at a price of $50 per cartridge, and the project’s life would be 3 years. Current assets would increase by $5,000 and payables by $3,000. At the end of 3 years, the equipment could be sold for $10,000. Variable costs would be 70% of sales revenues, fixed costs would be $30,000 per year, the marginal tax rate is 25%, and the corporate WACC is 11%. The CFO asks you to do a scenario analysis using these inputs: Scenario Probability Unit Sales VC% Best case 25% 4,800 65% Base case 50 4,000 70 Worst case 25 3,200 75 Other variables are unchanged. What are the expected NPV, its standard deviation, and the coefficient of variation? (Hint: To do the scenario analysis, you must change unit sales and VC% to the values specified for…
As a financial analyst, you must evaluate a proposed project to produce printer cartridges. The purchase price of the equipment, including installation, is $65,000, and the equipment will be fully depreciated at t = 0. Annual sales would be 4,000 units at a price of $50 per cartridge, and the project's life would be 3 years. Current assets would increase by $5,000 and payables by $3,000. At the end of 3 years, the equipment could be sold for $10,000. Variable costs would be 70% of sales revenues, fixed costs would be $30,000 per year, the marginal tax rate is 25%, and the corporate WACC is 11%. The CFO asks you to do a scenario analysis using these inputs: Scenario Probability Unit Sales VC% Best case 25% 4,800 65% Base case 50 4,000 70 Worst case 25 3,200 75 Other variables are unchanged. What are the expected NPV, its standard deviation, and the coefficient of variation? (Hint: To do the scenario analysis, you must change unit sales and VC% to the values specified for each scenario,…
As a financial analyst, you must evaluate a proposed project to produce printer cartridges. The purchase price of the equipment, including installation, is $65,000, and the equipment will be fully depreciated at t = 0. Annual sales would be 4,000 units at a price of $50 per cartridge, and the project's life would be 3 years. Current assets would increase by $5,000 and payables by $3,000. At the end of 3 years, the equipment could be sold for $10,000. Variable costs would be 70% of sales revenues, fixed costs would be $30,000 per year, the marginal tax rate is 25%, and the corporate WACE is 11%. The firm's project CVs generally range from 1.0 to 1.5. A 3% risk premium is added to the WACC if the initial CV exceeds 1.5, and the WACC is reduced by 0.5% if the CV is 0.75 or less. Then a revised NPV is calculated. What are the revised values for standard deviation, and coefficient of variation? • Standard deviation of NPV = $ • Coefficient of variation of NPV =
As a financial analyst, you must evaluate a proposed project to produce printer cartridges. The purchase price of the equipment, including installation, is $65,000, and the equipment will be fully depreciated at t = 0. Annual sales would be 4,000 units at a price of $50 per cartridge, and the project’s life would be 3 years. Current assets would increase by $5,000 and payables by $3,000. At the end of 3 years, the equipment could be sold for $10,000. Variable costs would be 70% of sales revenues, fixed costs would be $30,000 per year, the marginal tax rate is 25%, and the corporate WACC is 11%. If the project is of average risk, what is its NPV? Should it be accepted or rejected? (Round final answer to whole numbers.) NPV = $ Accept or Reject? project
As a financial analyst, you must evaluate a proposed project to produce printer cartridges. The purchase price of the equipment, including installation, is $65,000, and the equipment will be fully depreciated at t = 0. Annual sales would be 4,000 units at a price of $50 per cartridge, and the project’s life would be 3 years. Current assets would increase by $5,000 and payables by $3,000. At the end of 3 years, the equipment could be sold for $10,000. Variable costs would be 70% of sales revenues, fixed costs would be $30,000 per year, the marginal tax rate is 25%, and the corporate WACC is 11%. What is the required investment after bonus depreciation is considered, that is, the Year 0 project cash flow? What are the project’s annual cash flows? a) Project cash flow year 1 = $ b) Project cash flow year 2 = $ c) Project cash flow year 3 = $
As a financial analyst, you must evaluate a proposed project to produce printer cartridges. The purchase price of the equipment, including installation, is $65,000, and the equipment will be fully depreciated at t = 0. Annual sales would be 4,000 units at a price of $50 per cartridge, and the project’s life would be 3 years. Current assets would increase by $5,000 and payables by $3,000. At the end of 3 years, the equipment could be sold for $10,000. Variable costs would be 70% of sales revenues, fixed costs would be $30,000 per year, the marginal tax rate is 25%, and the corporate WACC is 11%. The firm’s project CVs generally range from 1.0 to 1.5. A 3% risk premium is added to the WACC if the initial CV exceeds 1.5, and the WACC is reduced by 0.5% if the CV is 0.75 or less. Then a revised NPV is calculated. What WACC should be used for this project when project risk has been properly considered?
As a financial analyst, you must evaluate a proposed project to produce printer cartridges. The purchase price of the equipment, including installation, is $65,000, and the equipment will be fully depreciated at t = 0. Annual sales would be 4,000 units at a price of $50 per cartridge, and the project’s life would be 3 years. Current assets would increase by $5,000 and payables by $3,000. At the end of 3 years, the equipment could be sold for $10,000. Variable costs would be 70% of sales revenues, fixed costs would be $30,000 per year, the marginal tax rate is 25%, and the corporate WACC is 11%. The firm’s project CVs generally range from 1.0 to 1.5. A 3% risk premium is added to the WACC if the initial CV exceeds 1.5, and the WACC is reduced by 0.5% if the CV is 0.75 or less. Then a revised NPV is calculated. What are the revised values for the NPV? NPV Best Case Scenario = $ . NPV Base Case Scenario = $ . NPV Worst-case Scenario = -$ . Expected NPV = $
An elective project is currently under review. It requires an initial investment of $116,000 for equipment. The profit is expected to be $28,000 each year, over the 6-year project period. The salvage value of the equipment at the end of the project period is projected to be $22,000. Assume a MARR of 10%. Find an IRR for this project.
Striped Potato is evaluating a project that would require the purchase of a piece of equipment for $365,000 today. During year 1, the project is expected to have relevant revenue of $216,000, relevant costs of $57,000, and relevant depreciation of $84,000. Striped Potato would need to borrow $365,000 today to pay for the equipment and would need to make an interest payment of $14,000 to the bank in 1 year. Relevant net income for the project in year 1 is expected to be $44,000. What is the tax rate expected to be in year 1?
management of Penfold Corporation is considering the purchase ofa machine that would cost $380,000, would last for 5 years, and would have no salvage value. The machine would reduce labor and other costs by $85,000 per year. The company requires a minimum pretax return of 13% on all investment projects. The Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using the tables provided. The net present value of the proposed project is closest to (Ignore income taxes.): Multiple Cholce $(81,055) $(6,055) $(166,055) $(379.997) Prev 1 of 4 Next > 9:44 AM ype here to search 49°F Mostly sunny 20 10/19/2021 DELL F11 F12 PrtScr Insert Delete PgUp PgDn Home End F3 F4 F5 F6 F7 F8 F9 F10 %24 & Num Lock Backspace 大