Question

In: Finance

The following data apply to the next three questions.          You have been asked to evaluate...

The following data apply to the next three questions.

         You have been asked to evaluate the proposed acquisition of a new machine to expand your company’s product line. The machine’s purchase price is $740,000. It would be depreciated straight-line, down to zero, over four years. Purchase of the machine would require an increase in net working capital of $100,000. The machine would generate $400,000 before-tax revenues per year but would have operating costs of $150,000 per year. The machine is expected to be used for 3 years and then be sold for $185,000. The firm’s marginal tax rate is 40%, and the project’s cost of capital is 12%.

13.    What is the initial (t=0) cash outflow?

         a.     $680,000                                        b.      $840,000

         c.     $815,000                                        d.      $720,000

14.    What is the total project cash flow at t=1?

         a.        $150,000                                     b.      $222,000

         c.        $224,000                                     d.      $237,000

15.    What is the total project cash flow at t=3?

         a.        $484,000                                     b.      $317,000

         c.        $497,000                                     d.      $509,000

Solutions

Expert Solution

jeff jeffy answered 1 year ago
Next > < Previous

Related Solutions

(The following data apply to the next three questions.) Assume the following cost and revenue data...
(The following data apply to the next three questions.) Assume the following cost and revenue data for General Hospital: Fixed costs = $15,000,000. Variable cost per inpatient day = $250. Revenue per inpatient day = $1,000. 1. What is the expected profit at a volume of 25,000 inpatient days? a. -$3,750,000 b. $ 0 c. $1,750,000 d. $2,750,000 e. $3,750,000 2. What revenue per inpatient day is required to obtain a profit of $1,000,000 at a volume of 25,000 patient...
THE FOLLOWING DATA APPLY TO THE NEXT THREE PROBLEMS Johnny and Ronny have both been given...
THE FOLLOWING DATA APPLY TO THE NEXT THREE PROBLEMS Johnny and Ronny have both been given $50,000 by their grandparents today on their 21st birthdays. They want to save for their future and have aspirations of one day being millionaires. Both boys plan to make annual contributions on their birthday, beginning next year. Johnny and Ronny have each opened investment accounts at Chase and Wells Fargo, respectively, and they expect to earn nominal returns of 8% and 9% respectively. Johnny...
As a senior analyst for the company you have been asked to evaluate a new IT...
As a senior analyst for the company you have been asked to evaluate a new IT software project. The company has just paid a consulting firm $100,000 for a test marketing analysis. After looking at the project plan, you anticipate that the project will need to acquire computer hardware for a cost of $450,000. The Australian Taxation Office rules allow an effective life for the computer hardware of five years. The equipment can be depreciated on a straight-line (prime cost)...
As a senior analyst for the company you have been asked to evaluate a new IT...
As a senior analyst for the company you have been asked to evaluate a new IT software project. The company has just paid a consulting firm $100,000 for a test marketing analysis. After looking at the project plan, you anticipate that the project will need to acquire computer hardware for a cost of $450,000. The Australian Taxation Office rules allow an effective life for the computer hardware of five years. The equipment can be depreciated on a straight-line (prime cost)...
You are given the following three stocks and you have been asked to propose a portfolio...
You are given the following three stocks and you have been asked to propose a portfolio for a wealthy client. The client wants either a 2 asset (A-B, B-C, or A-C) or a 3 asset(A-B-C) portfolio. In any case, the portfolios must be equal weighted. Which of the four portfolios do you suggest to the client? Why? Show your work step by step. Stocks Mean Return Std of Return X 1.5 4 Y 4 8 Z 7 1 Correlations X...
You are given the following three stocks and you have been asked to propose a portfolio...
You are given the following three stocks and you have been asked to propose a portfolio for a wealthy client.  The client wants either a 2 asset (A-B, B-C, or A-C) or a 3 asset(A-B-C) portfolio. In any case, the portfolios must be equal weighted.  Which of the four portfolios do you suggest to the client? Why? Show your work step by step. Stocks Mean Return Std of Return X 1.5 4 Y 4 8 Z 7 1 Correlations X and Y...
Answer the following questions, assuming that you have been asked to analyze a potential acquisition by...
Answer the following questions, assuming that you have been asked to analyze a potential acquisition by your company: (a) Which long-term assets on its financial statements are the most likely to be misstated by their carrying amounts? Explain your reasoning. (b) Is it possible that the company being considered for acquisition has some long-term assets that do not appear on its financial statements at all? Explain why or how this might occur.
IT Software Project As a senior analyst for the company you have been asked to evaluate...
IT Software Project As a senior analyst for the company you have been asked to evaluate a new IT software project. The company has just paid a consulting firm $100,000 for a test marketing analysis. After looking at the project plan, you anticipate that the project will need to acquire computer hardware for a cost of $450,000. The Australian Taxation Office rules allow an effective life for the computer hardware of five years. The equipment can be depreciated on a...
You have been asked by the president of your company to evaluate the proposed acquisition of...
You have been asked by the president of your company to evaluate the proposed acquisition of a new special-purpose truck. The truck's basic price is $265,000, and it will cost another $35,000 to modify it for special use by your firm. The truck falls into the MACRS three-year class, and it will be sold after three years for $45,000. Use of the truck will require an increase in net operating working capital (spare parts inventory) of $20,000. The truck will...
You have been asked by the president of your company to evaluate the proposed acquisition of...
You have been asked by the president of your company to evaluate the proposed acquisition of a new special-purpose truck for $410,000. The truck falls into the MACRS 3-year class, and it will be sold after 3 years for $66,000. Use of the truck will require an increase in NWC (spare parts inventory) of $6,600. The truck will have no effect on revenues, but it is expected to save the firm $120,000 per year in before-tax operating costs, mainly labor....
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT