We are evaluating a project that costs $103,337, has a seven-year life, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 4,088 units per year. Price per unit is $54, variable cost per unit is $30, and fixed costs are $81,403 per year. The tax rate is 32 percent, and we require a 11 percent return on this project. Suppose the projections given for price, quantity, variable costs, and fixed costs are all accurate to within +/-11 percent. What is the NPV of the project in worst-case scenario?

We are evaluating a project that costs $111,996, has a seven-year life, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 4,071 units per year. Price per unit is $54, variable cost per unit is $27, and fixed costs are $82,934 per year. The tax rate is 35 percent, and we require a 12 percent return on this project. Suppose the projections given for price, quantity, variable costs, and fixed costs are all accurate to within +/-11 percent. What is the NPV of the project in best-case scenario?

Reversing Rapids Co. purchases an asset for $110,738. This asset qualifies as a five-year recovery asset under MACRS. The five-year expense percentages for years 1, 2, 3, and 4 are 20.00%, 32.00%, 19.20%, and 11.52% respectively. Reversing Rapids has a tax rate of 30%. The asset is sold at the end of four years for $12,656. Calculate tax credit on disposal.

Round the answer to two decimals.

Raymond Mining Corporation has 8.8 million shares of common stock outstanding, 320,000 shares of 4% $100 par value preferred stock outstanding, and 149,000 7.50% semiannual bonds outstanding, par value $1,000 each. The common stock currently sells for $36 per share and has a beta of 1.40, the preferred stock currently sells for $92 per share, and the bonds have 10 years to maturity and sell for 117% of par. The market risk premium is 7.6%, T-bills are yielding 5%, and Raymond Mining’s tax is 38%.

a. What is the firm’s market value capital structure? (Enter your answers in whole dollars.)

b. If Raymond Mining is evaluating a new investment project that has the same risk as the firm’s typical project, what rate should the firm use to discount the project’s cash flows? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 3 decimal places.)

Discount rate            %

Clint Reno owns Real Cowboy, a western wear store that has current annual sales of $2,800,000. The degree of operating leverage (DOL) is 1.4. EBIT is $600,000. Real Cowboy has $2 million in debt, on which it pays 10 percent annual interest. Calculate the degree of combined leverage for Real Cowboy.

Calculate your answer using the EBIT and interest expense figures and your knowledge of how DOL and DFL jointly determine DCL.

AFN equation

Broussard Skateboard's sales are expected to increase by 20% from $8.4 million in 2016 to $10.08 million in 2017. Its assets totaled $2 million at the end of 2016. Broussard is already at full capacity, so its assets must grow at the same rate as projected sales. At the end of 2016, current liabilities were $1.4 million, consisting of $450,000 of accounts payable, $500,000 of notes payable, and $450,000 of accruals. The after-tax profit margin is forecasted to be 3%, and the forecasted payout ratio is 70%. Use the AFN equation to forecast Broussard's additional funds needed for the coming year. Round your answer to the nearest dollar.

Use Scenario 3 to answer questions 3A, 3B, and 3C (8-10 below).

Scenario 3: A machine costs $7,500 to buy (today) and has no salvage value. Maintenance costs are expected to be $0 the first year, but will increase by $900 every year after that. Operating costs are expected to be $1,200 every year. The machine will last 4 years and the firm has a MARR of 8% per year.

3B. Calculate the minimum equivalent uniform annual cost of the machine. (note: do not include currency signs, spaces, or commas).

Consider a 20-year, $115,000 mortgage with a rate of 5.55 percent. Eight years into the mortgage, rates have fallen to 5 percent. What would be the monthly saving to a homeowner from refinancing the outstanding mortgage balance at the lower rate? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

A- Project A requires an initial outlay at t = 0 of $4,000, and its cash flows are the same in Years 1 through 10. Its IRR is 16%, and its WACC is 12%. What is the project's MIRR? Do not round intermediate calculations. Round your answer to two decimal places.

B- Project L requires an initial outlay at t = 0 of $63,000, its expected cash inflows are $14,000 per year for 10 years, and its WACC is 12%. What is the project's payback? Round your answer to two decimal places.

C- Project L requires an initial outlay at t = 0 of $75,000, its expected cash inflows are $11,000 per year for 9 years, and its WACC is 14%. What is the project's MIRR? Do not round intermediate calculations. Round your answer to two decimal places.

ABC is a new company established in Victoria. The new equipment XYZ is considering costs $765,000 and is expected to last for 5 years. The equipment can be sold at $137,000 at the end of the project. The initial net working capital investment is 52,000 and will remain constant throughout the period and 100% will be recovered at the end of the final year. The new equipment will save $120,000 annually before taxes. If the company's required rate of return is 15% and the PVCCATs value is $123,765 determine the NPV value of the project. Assume a tax rate of 30%. The CCA rate is 35%.

Rentz Corporation is investigating the optimal level of current assets for the coming year. Management expects sales to increase to approximately $4 million as a result of an asset expansion presently being undertaken. Fixed assets total $2 million, and the firm plans to maintain a 40% debt-to-assets ratio. Rentz's interest rate is currently 9% on both short-term and long-term debt (which the firm uses in its permanent structure). Three alternatives regarding the projected current assets level are under consideration: (1) a restricted policy where current assets would be only 45% of projected sales, (2) a moderate policy where current assets would be 50% of sales, and (3) a relaxed policy where current assets would be 60% of sales. Earnings before interest and taxes should be 14% of total sales, and the federal-plus-state tax rate is 40%.

1. What is the expected return on equity under each current assets level? Round your answers to two decimal places.
   

   Restricted policy		%
   Moderate policy		%
   Relaxed policy		%

2. 
   
3. In this problem, we assume that expected sales are independent of the current assets investment policy. Is this a valid assumption?
   1. Yes, this assumption would probably be valid in a real world situation. A firm's current asset policies have no significant effect on sales.
   2. Yes, sales are controlled only by the degree of marketing effort the firm uses, irrespective of the current asset policies it employs.
   3. Yes, the current asset policies followed by the firm mainly influence the level of long-term debt used by the firm.
   4. Yes, the current asset policies followed by the firm mainly influence the level of fixed assets.
   5. No, this assumption would probably not be valid in a real world situation. A firm's current asset policies may have a significant effect on sales.
   
   -Select-IIIIIIIVVItem 4
4. 
   
5. How would the firm's risk be affected by the different policies?
   
   The input in the box below will not be graded, but may be reviewed and considered by your instructor.
   

Your company is considering a new project that will require $10,000 of new equipment at the start of the project. The equipment will have a depreciable life of five years and will be depreciated to a book value of $3,000 using straight-line depreciation. The cost of capital is 9 percent, and the firm's tax rate is 34 percent. Estimate the present value of the tax benefits from depreciation.