Question
In: Accounting
1. A company has a diversified film services and it is currently investing in a hollywood...
1. A company has a diversified film services and it is currently investing in a hollywood series film. It's desired required return in 8% and the hurdle rate is 20%. The company has already spent $23823 on the hollywood film, and needs to spend $2379 on the makeup and clothing costs for all movies, including this one. Working capital for this movie is $8814. The cost of the producing this movie is $4832811.The movie generates a cash flow of $71992 in the first year and grows at 3.1% annually for 5 years. Calculate the NPV for the project.
2. Tesco Company is purchasing new equipments for $1 million that has a CCA rate of 20%. The equipment can reduce working capital immediately by $7237 (once only) and can be sold for $2838 in 12 years. When the project is over, there will still be asserts in the CCA class. The new equipment can save up to $57888 before taxes per year. The discount rate is 6% and the tax rate is 21%. Remember that CCA expense has the half-year rule. Calculate the NPV.
Solutions
Expert Solution
| Required Rate of return | 8% | ||||
| Cash Outflows | |||||
| Already spent | 23823 | ||||
| Makeup cost | 2379 | ||||
| Working capital | 8814 | ||||
| Cost of the project | 48328 | ||||
| Total cash outflow | 83344 | ||||
| Year1 | Year 2 | Year 3 | Year 4 | Year 5 | |
| Cash Inflow | 71992 | 74223.75 | 76524.69 | 78896.95 | 81342.76 |
| Pvf | 0.925926 | 0.857339 | 0.793832 | 0.73503 | 0.680583 |
| Present Value | 66659.26 | 63634.9 | 60747.76 | 57991.62 | 55360.52 |
| Total cash Inflow | 304394.1 | ||||
| NPV | 221050.1 |
2.
| Cost of new Equipment | 10,00,000 | ||||||||||||
| CCA Rate | 20% | ||||||||||||
| 1 | Computaion of CCA | Year0 | Year 1 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | 11 | 12 |
| 2 | WDV | 1000000 | 800000 | 640000 | 512000 | 409600 | 327680 | 262144 | 209715.2 | 167772.2 | 134217.7 | 107374.2 | 85899.35 |
| 3 | Rate | 20% | 20% | 20% | 20% | 20% | 20% | 20% | 20% | 20% | 20% | 20% | 20% |
| 4 | CCA | 200000 | 160000 | 128000 | 102400 | 81920 | 65536 | 52428.8 | 41943.04 | 33554.43 | 26843.55 | 21474.84 | 17179.87 |
| 5 | Tax Savings | 42000 | 33600 | 26880 | 21504 | 17203.2 | 13762.56 | 11010.05 | 8808.038 | 7046.431 | 5637.145 | 4509.716 | 3607.773 |
| 6 | Savings on Working capital | 7237 | - | - | - | - | - | - | - | - | - | - | - |
| 7 | Asset sold for in 12 yrs | - | - | - | - | - | - | - | - | - | - | - | 2838 |
| 8 | Saving using new equipment | 57888 | 57888 | 57888 | 57888 | 57888 | 57888 | 57888 | 57888 | 57888 | 57888 | 57888 | 57888 |
| 9 | Net savings after taxes | 45731.52 | 45731.52 | 45731.52 | 45731.52 | 45731.52 | 45731.52 | 45731.52 | 45731.52 | 45731.52 | 45731.52 | 45731.52 | 45731.52 |
| Total savings | 94968.52 | 79331.52 | 72611.52 | 67235.52 | 62934.72 | 59494.08 | 56741.57 | 54539.56 | 52777.95 | 51368.66 | 50241.24 | 52177.29 | |
| PVF | 0.943396 | 0.889996 | 0.839619 | 0.792094 | 0.747258 | 0.704961 | 0.665057 | 0.627412 | 0.591898 | 0.558395 | 0.526788 | 0.496969 | |
| Present value | 89592.94 | 70604.77 | 60966.03 | 53256.83 | 47028.48 | 41940.98 | 37736.38 | 34218.79 | 31239.19 | 28683.99 | 26466.46 | 25930.52 | |
| Total present value | 547665.4 | ||||||||||||
 ekkarill92 answered 1 year agoRelated Solutions. Film scenario. A Hollywood film producer named John Mogul is evaluating a script for a.... Film scenario. A
Hollywood film producer named John Mogul is evaluating a script for
a potential film. Mogul estimates that the probability of a film
based on that script being a hit is .10 and probability of it being
a flop is .90. The studio accounting department estimates that if a
hit, the film will make $25 million in profit, but if a flop, will
lose $8 million. Before deciding whether or not to produce a film
based on...
A film studio in Hollywood produces movies according to the function (yes, they can also produce...A film studio in Hollywood produces movies according to the
function (yes, they can also produce fractions of movies... Think
of half a movie as a B-movie or so.) q = F(K, L) = K0.5L 0.5 /100
(reads as K to the power of 0.5 times L to the power of 0.5 divided
by 100). In the short run, capital (studios, gear) is fixed at a
level of 100. It costs $4,000 to rent a unit of capital and $1,000...
Our company has been a very profitable company for many years. Currently, they are considering investing...Our company has been a very profitable company for many years.
Currently, they are considering investing in a new project that
will last three years. The project will require an immediate
capital expenditure of $900,000 which will be fully expended this
year as is now allowable under the new tax law. Our company
estimates that the revenues from this project will be $500,000
during the first year and that the revenues will grow at a rate of
10% per year....
Please discuss if an investor will be well diversified or not by investing their entire wealth...Please discuss if an investor will be well diversified or not by
investing their entire wealth in each of the following stocks:
a) "spy"
b) "Brk b"
c) "qqq"
A telephone company, is contemplating investing in a project in multimedia applications. The company is currently...A telephone company, is contemplating investing in a project in
multimedia applications. The company is currently 30% debt
financed. The company’s analysts have estimated the project’s cash
flows but need to determine the project cost of capital. The
company's analysts assess that their new multimedia division has a
target debt-equity ratio of 0.6, and a cost of debt of 6.5%. In
addition, the risk-free rate is 3%, and market risk premium is
5%.
XYZ Co. is a pure play in...
Question : “By investing in diversified portfolio of stocks in different industries or sectors, you can...Question : “By investing in diversified portfolio of stocks in
different industries or sectors, you can remove all the risks
associated with a stock” -
Do you agree with statement? Explain using your own words. How
do we measure the risk associated with a particular stock? Explain
using your own words.
1. an investor considers investing in shares A and B. Stock A is currently trading at...1. an investor considers investing in shares A and B. Stock A is
currently trading at the price of $1000 with price earning ratio
(PER) value of 10X, meanwhile stock B is currently trading at the
price of $2000 with price earning ratio value of 20X. Its estimated
that EPS stock A will increase 50% than its previous EPS in the
next 3 months, while EPS stock B will decrease by 50% in the next 3
months. According to that...
1. Describe how Coca Cola company currently prices its main products or services. Is this the...1. Describe how Coca Cola company currently prices its main
products or services. Is this the best method? Why or why not?
i. Comment on the traditional approaches of skimming and
penetrating that would apply to Coca Cola.
2. Identify Coca Cola's primary marketing channel's strengths
and weaknesses?
i. Include an analysis of where you think Coca Cola can cut
costs while also providing more value from manufacturing to final
retail.
3. How do Global Brands Compete? What is the...
“By investing in diversified portfolio of stocks in different industries or sectors, you can remove all...“By investing in diversified portfolio of stocks in different
industries or sectors, you can remove all the risks associated with
a stock” - Do you agree with statement? Explain using your own
words.
How do we measure the risk associated with a particular stock?
Explain using your own words.
Amerbrand Company was a diversified company that sold various consumer products, including food, tobacco, distilled, and personal care products and financial services.Amerbrand Company (A)Amerbrand Company was a diversified company that sold various consumer products, including food, tobacco, distilled, and personal care products and financial services. Financial statements for the company for 2004 are shown in Exhibit 1. These statements reflect the following transactions (dollar amounts in thousands):1. Depreciation and amortization expense was $115,974.2. Net income included a loss of $66,046 resulting from the write-off of some obsolete equipment. The equip- ment had not yet been disposed of.3. Net income included $59,610...
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
ADVERTISEMENT
|