A project requires an initial investment of $200,000 in a machine and is expected to produce cost savings of $120,000 each year for two years. The tax rate is 30%. The machine will be depreciated using the MACRS 3-year schedule (first year 33%, second year 45%, third year 15% and fourth year 7%). The machine can be sold for $50,000 after two years. The project’s required return is 11%.

(1)   What is the initial cash flow at t=0?

(2)   What are the operating cash flows in year 1 and 2?

(3)   What is the year 2 terminal cash flow?

(4)   What is the NPV of the project?

Estimated cash flows appear below for an investment project. The project's required rate of return (RRR) is 11.40%. What is the discounted payback period for the project in years? Cash flows after Year 0 are assumed to be end-of-year cash flows. Year 0 cash flow = -67,000 Year 1 cash flow = 17,000 Year 2 cash flow = 20,000 Year 3 cash flow = 27,000 Year 4 cash flow = 30,000 Year 5 cash flow = 24,000 Select one: a. 3.37 b. 3.83 c. 4.09 d. 3.06 e. 2.87 f. 3.25

Suppose that you have been offered a 10-year lease with the following terms:

30,000 square feet of space Year 1 rent is $15 per square foot per year. Rent will escalate at 2.5% per year.

Year 1 operating expenses are expected to be $3 per square foot per year. Operating expenses are expected to escalate at a rate of 3% per year. The landlord will provide a tenant improvement allowance of $20 per square foot. The landlord is offering the following concessions: Years 1 and 2 will be rent-free. What is the effective rent for this lease? Assume a discount rate of 8% per year.

Managers at Terlingua Drilling identify a potential new drilling project. They estimate the following expected net cash flows if the project is adopted. Year 0: ($1,250,000) Year 1: $100,000 Year 2: $400,000 Year 3: $400,000 Year 4: $200,000 Year 5: $200,000 Year 6: $300,000 Year 7: $100,000 Suppose that the appropriate discount rate for this project is 11.9%, compounded annually. Calculate the net present value for this proposed project. Do not round at intermediate steps in your calculation. Round your answer to the nearest dollar. If the NPV is negative, include a minus sign. Do not type the $ symbol.

Depreciation by Three Methods; Partial Years

Layton Company purchased tool sharpening equipment on October 1 for $65,070. The equipment was expected to have a useful life of three years or 7,020 operating hours, and a residual value of $1,890. The equipment was used for 1,300 hours during Year 1, 2,500 hours in Year 2, 2,100 hours in Year 3, and 1,120 hours in Year 4.

Required:

Determine the amount of depreciation expense for the years ended December 31, Year 1, Year 2, Year 3, and Year 4, by (a) the straight-line method, (b) the units-of-activity method, and (c) the double-declining-balance method.

Here is project Y:

The cash flow in year 0 is negative $23,000.

The cash flow in year 1 is $32,000.

The cash flow in year 2 is $26,000.

The cash flow in year 3 is negative $12,000.

Here is project Z:

The cash flow in year 0 is negative $42,000.

The cash flow in year 1 is $58,000.

The cash flow in year 2 is $39,000.

The cash flow in year 3 is negative $35,000.

Your decision rule is to choose the project that has a higher net present value.

The discount rate is 15% for both projects.

Which project will you choose? What is the net present value of that project?

Assume monetary benefits of an information system of $40,000 the first year and increasing benefits of $10,000 a year for the next five years (year 1 = $50,000, year 2 = $60,000, year 3 = $70,000, year 4 = $80,000, year 5 = $90,000). Onetime development costs were $80,000 and recurring costs were $45,000 over the duration of the system’s life. The discount rate for the company was 11 percent. Using a six-year time horizon, calculate the net present value of these costs and benefits. Also calculate the overall return on investment and then present a break-even analysis. At what point does breakeven occur?

You are negotiating to make a 7-year loan of $25,000 to Breck Inc. To repay you, Breck will pay $2,000 at the end of Year 1, $5,000 at the end of Year 2, and $7,000 at the end of Year 3, plus a fixed but currently unspecified cash flow, X, at the end of each year from Year 4 through Year 7. Breck is essentially riskless, so you are confident the payments will be made. You regard 7.5% as an appropriate rate of return on a low risk but illiquid 7-year loan. What cash flow must the investment provide at the end of each of the final 4 years, that is, what is X?

consider P. Ltd, a one-asset firm with no liabilities. Assume that the asset will generate end-of-year cash flows of $100 each year for three years and then will have zero value. The interest rate in the economy is 10%.

Question: 1.prepare the b/s, and i/s for year 1, year2, and year 3.

2. if the firm has one more asset. the asset will generate end of year cash flows of $200 each year for three years and then will have zero value. the interest rate in the economy is 10%, prepare the b/s, and i/s for year 1, year2, and year 3.

A bond trader bought each of the following bonds at a yield to maturity of 8 percent. Few weeks after the purchase of the bonds, interest rates fell to 7 percent. Maturity Coupon Price at 8% Price at 7% Percentage change 10-year 10% annual coupon 10-year zero 5-year zero 30-year zero R100 Perpetuity Required: Complete missing information in the above table.

Maturity
Coupon
Price at 8%
Price at 7%
Percentage change
10-year
10% annual coupon
10-year
zero
5-year
zero
30-year
zero
R100
Perpetuity