Part A Bennett Co. has a potential new project that is expected to generate annual revenues...

Part A

Bennett Co. has a potential new project that is expected to generate annual revenues of $260,300, with variable costs of $143,200, and fixed costs of $60,700. To finance the new project, the company will need to issue new debt that will have an annual interest expense of $23,500. The annual depreciation is $24,800 and the tax rate is 35 percent. What is the annual operating cash flow?

Part B

Bruno's Lunch Counter is expanding and expects operating cash flows of $31,700 a year for 6 years as a result. This expansion requires $110,300 in new fixed assets. These assets will be worthless at the end of the project. In addition, the project requires $7,800 of net working capital throughout the life of the project. What is the net present value of this expansion project at a required rate of return of 11 percent?

Part C

A project with a life of 6 years is expected to provide annual sales of $300,000 and costs of $205,000. The project will require an investment in equipment of $550,000, which will be depreciated on a straight-line method over the life of the project. You feel that both sales and costs are accurate to +/-15 percent. The tax rate is 40 percent. What is the annual operating cash flow for the best-case scenario?

Part D

A project with a life of 8 years is expected to provide annual sales of $440,000 and costs of $317,000. The project will require an investment in equipment of $760,000, which will be depreciated on a straight-line method over the life of the project. You feel that both sales and costs are accurate to +/-15 percent. The tax rate is 35 percent. What is the annual operating cash flow for the best-case scenario?

Solutions

Expert Solution

jeff jeffy answered 4 months ago

Next > < Previous

Related Solutions

ABC Company is considering a new project. The project is expected to generate annual sales of...

ABC Company is considering a new project. The project is expected to generate annual sales of $65476, variable costs of $18689, and fixed costs of $9650. The depreciation expense each year is $10884 and the tax rate is 25 percent. What is the annual operating cash flow? Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer...

A new project is expected to generate annual sales of $74 million, annual expenses of $42...

A new project is expected to generate annual sales of $74 million, annual expenses of $42 million, and an annual depreciation expense of $10 million. The firm's tax rate is 35%. Calculate the OCF (Operating Cash flow) for the year by using any of the three methods discussed in the chapter 9

A new semi-automatic machine costs $ 80,000 and is expected to generate revenues of $ 40,000...

A new semi-automatic machine costs $ 80,000 and is expected to generate revenues of $ 40,000 per year for 6 years. It will cost $ 25,000 per year to operate the machine. At the end of 6 years, the machine will have a salvage value of $ 10,000. Evaluate the investment in this machine using all four methods (payback period, present worth, uniform annual cost (UAC), and rate of return). Neglect the salvage value for the payback period method and...

Pharma-Corp is considering investing in a new project that will generate revenues of $9 million in...

Pharma-Corp is considering investing in a new project that will generate revenues of $9 million in its first year of operation and these revenues will grow at the rate of 3% per year thereafter. The project also entails R&D expenditures of $3 million in the first year of operation and these expenditures are expected to grow at the rate of 10% per year. The project would be pursued only as long as it yields a positive net cash flow. That...

a project with an initial cost of $73,600 is expected to generate annual cash flows of...

a project with an initial cost of $73,600 is expected to generate annual cash flows of $16,360 for the next 8 years. what is the projects internal rate of retu

19) A firm is considering a project that is expected to generate annual cash flows of...

19) A firm is considering a project that is expected to generate annual cash flows of $24,000 for 15 years. The project requires an initial investment of $247,103.44. The cost of capital is 8.13%. What is the IRR of the project?

An investment project requires an initial outlay of $100,000, and is expected to generate annual cash...

An investment project requires an initial outlay of $100,000, and is expected to generate annual cash inflows of $28,000 for the next 5 years. The cost of capital is 12 percent. Determine the internal rate of return for the project (to the nearest tenth of one percent). a. 12.0% b. 12.6% c. 3.6% d. 12.4%

6. A project with an initial cost of $58,050 is expected to generate annual cash flows...

6. A project with an initial cost of $58,050 is expected to generate annual cash flows of $15,480 for the next 7 years. What is the project's internal rate of return? 9. Rossdale Flowers has a new greenhouse project with an initial cost of $365,000 that is expected to generate cash flows of $48,600 for 10 years and a cash flow of $64,000 in Year 11. If the required return is 8.4 percent, what is the project's NPV?

A 7-year project is expected to generate annual sales of 10,400 units at a price of...

A 7-year project is expected to generate annual sales of 10,400 units at a price of $91 per unit and a variable cost of $62 per unit. The equipment necessary for the project will cost $437,000 and will be depreciated on a straight-line basis over the life of the project. Fixed costs are $265,000 per year and the tax rate is 35 percent. How sensitive is the operating cash flow to a $1 change in the per unit sales price?

Subjects