Question

In: Finance

Cookie Cutter Corp. is considering a new project whose data are shown below. The equipment that...

Cookie Cutter Corp. is considering a new project whose data are shown below. The equipment that would be used has a 5-year tax life, would be depreciated by the straight-line method over its 5-year life, and would have a zero salvage value. No change in net operating working capital would be required. Revenues and other operating costs are expected to be constant over the project's 5-year life. What is the project's IRR? Do not round the intermediate calculations. State in percentage terms without the percent sign symbol and round to the second decimal place. (Thus, 12.98756% would be written as 12.99 to be correct)

  • Net investment cost (depreciable basis) = $140,000
  • Straight-line depreciation rate = 20.00% per year
  • Cash Sales revenues, each year = $71,000
  • Annual cash operating costs (excluding depreciation) = $25,000
  • Tax rate = 22.0%

Solutions

Expert Solution

Operating cash flow (OCF) each year = income after tax + depreciation

IRR is calculated using IRR function in Excel

IRR is 15.28%


Related Solutions

Cookie Cutter Corp. is considering a new project whose data are shown below. The equipment that...
Cookie Cutter Corp. is considering a new project whose data are shown below. The equipment that would be used has a 5-year tax life, would be depreciated by the straight-line method over its 5-year life, and would have a zero salvage value. No change in net operating working capital would be required. Revenues and other operating costs are expected to be constant over the project's 5-year life. What is the project's NPV? Do not round the intermediate calculations and round...
Cookie Cutter Corp. is considering a new project whose data are shown below. The equipment that...
Cookie Cutter Corp. is considering a new project whose data are shown below. The equipment that would be used has a 5-year tax life, would be depreciated by the straight-line method over its 5-year life, and would have a zero salvage value. No change in net operating working capital would be required. Revenues and other operating costs are expected to be constant over the project's 5-year life. What is the project's NPV? Do not round the intermediate calculations and round...
Cookie Cutter Corp. is considering a new project whose data are shown below. The equipment that...
Cookie Cutter Corp. is considering a new project whose data are shown below. The equipment that would be used has a 5-year tax life, would be depreciated by the straight-line method over its 5-year life, and would have a zero salvage value. No change in net operating working capital would be required. Revenues and other operating costs are expected to be constant over the project's 5-year life. What is the project's NPV? Do not round the intermediate calculations and round...
Cookie Cutter Corp. is considering a new project whose data are shown below. The equipment that...
Cookie Cutter Corp. is considering a new project whose data are shown below. The equipment that would be used has a 5-year tax life, would be depreciated by the straight-line method over its 5-year life, and would have a zero salvage value. No change in net operating working capital would be required. Revenues and other operating costs are expected to be constant over the project's 5-year life. What is the project's NPV? Do not round the intermediate calculations and round...
Temple Corp. is considering a new project whose data are shown below. The equipment that would...
Temple Corp. is considering a new project whose data are shown below. The equipment that would be used has a 3-year tax life, would be depreciated by the straight-line method over its 3-year life, and would have a zero salvage value. No change in net operating working capital would be required. Revenues and other operating costs are expected to be constant over the project's 3-year life. What is the project's NPV? Do not round the intermediate calculations and round the...
Temple Corp is considering a new project whose data are shown below. The equipment that would...
Temple Corp is considering a new project whose data are shown below. The equipment that would be used has a 3-year tax life, would be depreciated by the straight-line method over its 3-year life, and would have a zero salvage life. No change in net operating working capital would be required. Revenues and other operating costs are expected to be constant over the project's 3-year life. What is the project's NPV? Risk-adjusted WACC 10.0% Net investment cost (depreciable basis) $65,000...
Temple Corp. is considering a new project whose data are shown below. The equipment that would...
Temple Corp. is considering a new project whose data are shown below. The equipment that would be used has a 4-year tax life, would be depreciated by the straight-line method over its 4-year life, and would have a zero salvage value. At the end of the project, the equipment would be sold for $8,000 cash. No new working capital would be required. Revenues and other operating costs are expected to be constant over the project’s 4-year life. What is the...
Temple Corp. is considering a new project whose data are shown below. The equipment that would...
Temple Corp. is considering a new project whose data are shown below. The equipment that would be used has a 3-year tax life, would be depreciated by the straight-line method over its 3-year life, and would have a zero salvage value. No change in net operating working capital would be required. Revenues and other operating costs are expected to be constant over the project's 3-year life. What is the project's NPV?  Do not round the intermediate calculations and round the final...
Temple Corp. is considering a new project whose data are shown below. The equipment that would...
Temple Corp. is considering a new project whose data are shown below. The equipment that would be used has a 4-year tax life, would be depreciated by the straight-line method over its 4-year life, and would have a zero salvage value. At the end of the project, the equipment would be sold for $8,000 cash. No new working capital would be required. Revenues and other operating costs are expected to be constant over the project’s 4-year life. What is the...
Temple Corp. is considering a new project whose data are shown below. The equipment that would...
Temple Corp. is considering a new project whose data are shown below. The equipment that would be used has a 3-year tax life, would be depreciated by the straight-line method over its 3-year life, and would have a zero salvage value. No change in net operating working capital would be required. Revenues and other operating costs are expected to be constant over the project's 3-year life. What is the project's NPV? Do not round the intermediate calculations and round the...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT