Question

please answer all questions and post answers clearly for each part.

Cody Jackson plans importing olives to sell to restaurants and specialty stores. This venture will require an initial outlay of $537,800 to buy a refrigerated storage unit, which can be depreciated (straight-line) to a salvage value of $140,000 in 15 years. In addition, she will need $80,000 in working capital during the 15 years of the project. Annual sales are estimated to be $250,000 and annual expenses $150,000. She also estimates that the marginal tax rate and RRR will be 28% and 8%, respectively, during the lifetime of project. Using the given information, answer the following questions
a. What is the depreciation amount each year?
b. What is the net cash flow associated with the venture at year 1?
c. What is the amount of tax payment at year 8?
d. What is the net present value (NPV) of the proposed project?
e. What is the IRR of the project?
f. Should the company accept the project? Justify your answer by using the IRR of the project.
g. Calculate the net present values of the project (NPV) at the different RRR. The RRR starts from 0% and increases by 2% until 20%. Paste to the “answer” sheet only the NPV at 10%.
h. Using the answers in the question g, draw a chart that shows the NPV of the project at different levels of cost of capital. Don’t forget to give appropriate title and labels of X and Y on the chart

Answer 1

Depreciation per year	(cost of machine-salvage value)/life of project	(537800-140000)/15	26520
Year	0	1	2	3	4	5	6	7	8	9	10	11	12	13	14	15
Initial Investment	-537800
investment in working capital	-80000
annual sales		250000	250000	250000	250000	250000	250000	250000	250000	250000	250000	250000	250000	250000	250000	250000
annual expense		150000	150000	150000	150000	150000	150000	150000	150000	150000	150000	150000	150000	150000	150000	150000
annual depreciation		26250	26250	26250	26250	26250	26250	26250	26250	26250	26250	26250	26250	26250	26250	26250
operating profit		73750	73750	73750	73750	73750	73750	73750	73750	73750	73750	73750	73750	73750	73750	73750
less tax-28%		20650	20650	20650	20650	20650	20650	20650	20650	20650	20650	20650	20650	20650	20650	20650
after tax profit		53100	53100	53100	53100	53100	53100	53100	53100	53100	53100	53100	53100	53100	53100	53100
add depreciation		26250	26250	26250	26250	26250	26250	26250	26250	26250	26250	26250	26250	26250	26250	26250
scrap value of machine																140000
recovery of working capital																80000
net operating cash flow	-617800	79350	79350	79350	79350	79350	79350	79350	79350	79350	79350	79350	79350	79350	79350	246250
net present value =Using NPV function in MS excel	NPV(8%,H1210:V1210)+G1210	$114,008
IRR =Using IRR function in MS excel	IRR(G1210:V1210)	10.67%
A-	Depreciation amount each year		26520						jeff jeffy Next > < Previous Related Solutions Please answer all the questions clearly and accurately with high charting the tables on the subject... Please answer all the questions clearly and accurately with high charting the tables on the subject I want the answer to be written on the computer and not handwritten, please The following information has been obtained from the records of AJ Corporation Ltd for the period from January 1 to June 30, 2013. Prepare a Cost Sheet. PARTICULARS 1. 1.2013 $ 30.6.2013 $ Cost of Raw Materials 10,000 7,500 Cost of Work in Progress 5,000 6,000 Cost of Stocks of... Please answer all the questions clearly and accurately with high charting the tables on the subject... 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