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A manufacture company is evaluating a new project. If the company issues $3,000 equity to finance...
A manufacture company is evaluating a new project. If the company issues $3,000 equity to finance the project, the project will return $3,750 or 25% in one year. Assuming the required rate of return is 16% and the tax rate is zero. Without the project, the company is expected to generate $5,500 cash flow if the economy is in the best case, $4,000 if the economy is in an average case, and $2,000 if the economy is in the worst case. Each economic outcome has an equal possibility to occur. There is a $4,000 debt due in one year. Do you recommend the company to take the project? What is the value of equity if the project is taken?
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jeff jeffy answered 2 years agoRelated Solutions
You are evaluating an investment project costing $43,000 initially. The project will provide $3,000 in after-tax...
You are evaluating an investment project costing $43,000
initially. The project will provide $3,000 in after-tax cash flows
in the first year, $4,000 in the second year and $9,000 each year
thereafter for 10 years. The maximum payback period for your
company is 7 years.
Attempt 1/1 for 10 pts.
Part 1
What is the payback period for this project?
A company is evaluating a new 4-year project. The equipment necessary for the project will cost...
A company is evaluating a new 4-year project. The equipment
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MACRS class. The depreciation percentage each year is 20.00
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percent, respectively. The company's tax rate is 40 percent. What
is the aftertax salvage value of the equipment?
The sales and finance team of a car company is evaluating a new proposed luxury model...
The sales and finance team of a car company is evaluating a new
proposed luxury model of its
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first year, and increase by a rate
of either 3% or 5% per year as a result...
The sales and finance team of a car company is evaluating a new proposed luxury model...
The sales and finance team of a car company is evaluating a
new proposed luxury model of its brand that will require an
investment of $1Billion in a new machine for car interior
decoration. Demand for the company’s car is expected to begin at
100,000 units in year 1, with 10% annual growth thereafter.
Production cost will be $35,000 per unit in the first year, and
increase by a rate of either 3% or 5% per year as a result...
Question 3 The sales and finance team of a car company is evaluating a new proposed...
Question 3
The sales and finance team of a car company is evaluating a new
proposed luxury model of its
brand that will require an investment of $1Billion in a new machine
for car interior decoration.
Demand for the company’s car is expected to begin at 100,000 units
in year 1, with 10% annual
growth thereafter. Production cost will be $35,000 per unit in the
first year, and increase by a rate
of either 3% or 5% per year as...
The sales and finance team of a car company is evaluating a new proposed luxury model...
The sales and finance team of a car company is evaluating a
new proposed luxury model of its brand that will require an
investment of $1Billion in a new machine for car interior
decoration. Demand for the company’s car is expected to begin at
100,000 units in year 1, with 10% annual growth thereafter.
Production cost will be $40,000 per unit in the first year, and
increase by a rateof either 3% or 5% per year as a result of...
Threes Company is evaluating a new project. Threes has to invest $500,000 into the project now,...
Threes Company is evaluating a new
project. Threes has to invest $500,000 into the project now, and,
then, the firm expects to receive (after-taxes) cash inflows from
this project as below:
Year 1
Year 2
Year 3
Year 4
Year 5
$125,000
$186,000
$225,000
$190,000
$140,000
Threes uses the CAPM in estimating
cost of equity capital. Threes Co’s’ estimates on the CAPM
variables are as follows: the project’s beta = 1.50; the risk-free
rate = 4%; and the return on...
Question 1: You are currently evaluating a new project for your company. The project requires an...
Question 1:
You are currently evaluating a new project for your company. The
project requires an initial investment in equipment RM 90,000 and
an investment in working capital of RM10,000 at the beginning
(t=0). The project is expected to produce sales revenues of RM120,
000 for three years. Manufacturing costs are estimated to be 60% of
the revenues. The asset is depreciated over the project’s life
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installed. The asset will be depreciated S/L for 5 years to a
zero salvage.
Your company is expecting the asset to have a market value of
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12%
a) Calculate the after tax asset value for the asset at the end
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Using Excell Your company is evaluating a new project that will require the purchase of an...
Using Excell
Your company is evaluating a new project that will require the
purchase of an asset for $25,000 installed. The asset will be
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expecting the asset to have a market value of $4,000 at the end of
5 years. The applicable tax rate is 30% and the cost of capital is
12%
a) Calculate the after tax asset value for the asset at the end
of 5 years....
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