Question
In: Finance
Digg company is evaluation two projects for next year’s capital budgeting. The after-tax cash flow ($)...
Digg company is evaluation two projects for next year’s capital budgeting. The after-tax cash flow ($) (including depreciation) are following:
Project A Project B
Year 0 -6000 -17500
Year 1 2000 5600
Year 2 2000 5600
Year 3 2000 5600
Year 4 2000 5600
Year 5 2000 5600
Year 6 4000 9000
If company’s WACC is 13%, find NPV, IRR, Payback and discount payback for each project. If the projects are mutually exclusive what is your recommendation to the company.
Specific help and showing of work for the payback discount please!!
Solutions
jeff jeffy answered 1 year agoRelated Solutions
Digg company is evaluation two projects for next year’s capital budgeting. The after-tax cash flow ($)...
Digg
company is evaluation two projects for next year’s capital
budgeting. The after-tax cash flow ($) (including depreciation) are
following:
Project
A
Project B
Year
0 -6000 -17500
Year
1
2000
5600
Year
2
2000
5600
Year
3
2000
5600
Year
4
2000
5600
Year
5
2000
5600
Year
6
4000
9000
If
company’s WACC is 13%, find NPV, IRR, Payback and discount payback
for each project. If the projects are mutually exclusive what is
your recommendation to the company.
A firm with a 14% WACC is evaluating two projects for this year’s capital budget. After-tax...
A firm with a 14% WACC is evaluating two projects for this
year’s capital budget. After-tax cash flows, including
depreciation, are as follows:
PROJECT A: year 0 = -$6000 | year 1 = $2000 | year 3 = $2000 |
year 4 = $2000 | year 5 = $2000
PROJECT B: Year 0 = -$18,000 | Year 1 = $5600 | Year 2 = $5600 |
year 3 = $5600 | year 4 = $5600 | year 5 = $5600...
Capital budgeting and cash flow analysis
Th e Taylor Mountain Uranium Company currently has annual cash revenues of $1.2 millionand annual cash expenses of $700,000. Depreciation amounts to $200,000 per year.Th ese fi gures are expected to remain constant for the foreseeable future (at least 15 years).Th e fi rm’s marginal tax rate is 40 percent.A new high-speed processing unit costing $1.2 million is being considered as a potentialinvestment designed to increase the fi rm’s output capacity. Th is new piece of equipmentwill have an estimated...
The cash flow in respect of two projects is given below. The cost of capital is...
The cash flow in respect of two projects is given below. The
cost of capital is 8.5%.
Year
Project A
Project B
0
(200)
(300)
1
65
100
2
65
100
3
65
90
4
60
70
5
60
70
Answer the following question using the above information.
I
What is the NPV of Project A? Should this project be accepted?
II What is the
NPV of Project B? Should this project be accepted? (Please state
based on what the...
a) What is the Before Tax Cash Flow? b) What is the After Tax Cash Flow?...
a) What is the Before Tax Cash Flow?
b) What is the After Tax Cash Flow?
Given: Annual Debt Service
$20,876
Vacancy & Collection Loss 5%
Depreciation
11,000
PGI
46,200
Interest
1,700
Operating Expenses
18,400
Marginal Tax Rate
28%
All numbers are annual
If possible, please use a financial calculator and show
me how to solve as I need to learn this concept for this
class.
Explain the project evaluation project in relation to capital budgeting and the purpose of investment projects....
Explain the project evaluation project in relation to capital
budgeting and the purpose of investment projects. Purposes were
categorized into 6 categories: replacement, renewal, expansion,
cost-reduction, conforming, and all other projects.
Evaluating a capital budgeting project that costs $40,000 that is expected to generate after-tax cash flows...
Evaluating a capital budgeting project that costs $40,000 that
is expected to generate after-tax cash flows of $15,000 per year
for three years. If the required rate of return is 10 percent
calculate the project’s (a) NPV and (b) IRR. Should the project be
purchased?
This is for a review
Please show steps and rationale for project purchase.
3. The cash flow in respect of two projects is given below. The cost of capital...
3. The cash flow
in respect of two projects is given below. The cost of capital is
8.5%.
Year
Project A
Project B
0
(200)
(300)
1
65
100
2
65
100
3
65
90
4
60
70
5
60
70
Answer the following question using the above information.
I
What is the NPV of Project A? Should this project be accepted?
II What is the
NPV of Project B? Should this project be accepted?
III What is the
Accounting...
Which Tax Rate do I use for a capital budgeting cash flow statement: marginal or effective...
Which Tax Rate do I use for a capital budgeting cash flow
statement: marginal or effective tax rate?
Compute the cash flow, tax flow, and after tax flow for the following real estate investment...
Compute the cash flow, tax flow, and after tax flow for
the following real estate investment property:
-Gross rents are expected to be $36,000 per year
-Expected vacancy allowance is 5% of gross rents
-Property management fees are 8% of rents collected
-Total estimated operating expenses per year $7,200
-Payment of mortgage per year:
Interest 12,000
Principal 3,000
Total 15,000
-Depreciation allowance for the year is $14,350
-The owner's earned income is $100,000 and his marginal tax
bracket is 30%...
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