Question

9. A project requires a $219,000 investment in equipment. The equipment is expected to worth $128,000 when the project ends in 7 years. Operating savings are expected to be $12,000 in the first year and are expected to increase 5% per year for the life of the project. The CCA rate is 30%, the firm's discount rate is 13%, and the company’s tax rate is 22%. What amount would you use for salvage value in your NPV calculation? (Do not round intermediate calculations. Round the final answer to 2 decimal places. Omit any commas and the $ sign in your response. For example, an answer of $1,000.50 should be entered as 1000.50.)

10. A company had net fixed assets of $6.5 million on December 31, 2018 and $11 million on December 31, 2019. For 2019, the company’s depreciation expense was $750,000 and its cash flow from operations was $20 million. During 2019, the company’s net working capital declined by $1.25 million. What was the firm's net capital spending? (Do not round intermediate calculations. Round the final answer to 2 decimal places. Omit any commas and the $ sign in your response. For example, an answer of $1,000.50 should be entered as 1000.50.)

Answer 1

9.

The formulas and the inputs used is as follows:

The result is as follows:

10.

Firm's net capital spending = Net fixed assets on December 2019 + Depreciation Expense - Net fixed assets on December 2018

Firm's net capital spending = $11 Million + $0.75 Million - $6.5 Million

Firm's net capital spending = $5.25 Million

Firm's net capital spending = $5250000