1. H Corp recently purchased a new delivery truck. The new truck has a cost of $56250 and is expected to generate after tax cash flows including depreciation of $15625 per year. The truck has a five year expected life. The expected year end abandonment Values (Salvage Value after tax adjustments) for the truck are given below. The company’s cost of capital is 11%

Year                 Annual operating CF     Abandonment Value

0                      (56250)                         ----

1                      15,625                          43750

2                      15,625                          35000

3                      15,625                          27500

4                      15,625                          12500

5                      15,625                          0

Should the truck operate until the end of its 5 year life? If not what is the optimal economic life of the truck?

A) 1 year

B) 2 years

C) 3 years

D) 4 years

E) 5 years

A firm producing digital cameras considers a new investment which is about opening a new plant.

The project’s lifetime is estimated as 5 years and requires 22 million TL as investment cost. Salvage value of the project is estimated as 4 million TL (which will be received in the sixth year) However firm prefers to show salvage value only as 2 million TL. Firm uses 5-year straight line depreciation.

It is estimated that the sales will be 12 million TL next year and then sales will grow by 20% each year.

It is estimated that fixed costs will be 1.5 million next year and then will grow by 5% each year.

Variable costs are projected %10 of sales each year.

This project, in addition, requires a working capital of $ 3 million in the first year, 4 million in the second year, 4 million in third year, 3 million in the fourth year and 1.5 million in the fifth year.

Firm plans to use a debt/equity ratio of %50 in this project.

The company can borrow TL loan with an interest cost of 14% before tax. Corporate tax rate is 20%. The shares of this company in Borsa Istanbul are selling at 8 TL and the stocks have approximately market risk and have strong correlation with BIST100 index. 10- year government bond yields at %12 and market risk premium is %8.

Given this information; find the NPV and IRR of the project; is this project feasible or not?

If you want, you can solve this question using excel.

What is the result of higher WACC ? Can a company reduce its WACC ? If yes, how? Give numerical example related with this project and explain this topic briefly regarding to the capital structure theories.

A firm producing digital cameras considers a new investment which is about opening a new plant. The project’s lifetime is estimated as 5 years and requires 22 million TL as investment cost. Salvage value of the project is estimated as 4 million TL (which will be received in the sixth year) However firm prefers to show salvage value only as 2 million TL. Firm uses 5-year straight line depreciation. It is estimated that the sales will be 12 million TL next year and then sales will grow by 20% each year. It is estimated that fixed costs will be 1.5 million next year and then will grow by 5% each year. Variable costs are projected %10 of sales each year. This project, in addition, requires a working capital of $ 3 million in the first year, 4 million in the second year, 4 million in third year, 3 million in the fourth year and 1.5 million in the fifth year. Firm plans to use a debt/equity ratio of %50 in this project. The company can borrow TL loan with an interest cost of 14% before tax. Corporate tax rate is 20%. The shares of this company in Borsa Istanbul are selling at 8 TL and the stocks have approximately market risk and have strong correlation with BIST100 index. 10- year government bond yields at %12 and market risk premium is %8. Given this information; find the NPV and IRR of the project; is this project feasible or not? If you want, you can solve this question using excel. What is the result of higher WACC ? Can a company reduce its WACC ? If yes, how? Give numerical example related with this project and explain this topic briefly regarding to the capital structure theories.

A firm producing digital cameras considers a new investment which is about opening a new plant.

The project’s lifetime is estimated as 5 years and requires 22 million TL as investment cost. Salvage value of the project is estimated as 4 million TL (which will be received in the sixth year) However firm prefers to show salvage value only as 2 million TL. Firm uses 5-year straight line depreciation.

It is estimated that the sales will be 12 million TL next year and then sales will grow by 20% each year.

It is estimated that fixed costs will be 1.5 million next year and then will grow by 5% each year.

Variable costs are projected %10 of sales each year.

This project, in addition, requires a working capital of 3 million TL in the first year, 4 million TL in the second year, 4 million TL in third year, 3 million TL in the fourth year and 1.5 million in the fifth year.

Firm plans to use a debt/equity ratio of %50 in this project.

The company can borrow TL loan with an interest cost of 14% before tax. Corporate tax rate is 20%. The shares of this company in Borsa Istanbul are selling at 8 TL and the stocks have approximately market risk and have strong correlation with BIST100 index. 10- year government bond yields at %12 and market risk premium is %8.

Given this information; find the NPV and IRR of the project; is this project feasible or not?

If you want, you can solve this question using excel.

What is the result of higher WACC ? Can a company reduce its WACC ? If yes, how? Give numerical example related with this project and explain this topic briefly regarding to the capital structure theories.

What it is: "New" asks individuals to develop new or different responses.

Your task: What has been one topic about education and public policy that was not discussed in this course that you would like to have explored? Why?

Assume you want to open a new retail bookstore that carries both new and used books. You hope that you can also bring in authors to the store in order to sign their books. You can select any city you would like in which to locate the bookstore. Using Michael Porter's five industry forces as your framework, determine the viability of actually opening your bookstore.

Murphy’s Motors is considering a new product line to fulfil a four-year contract. The new product line will require an initial fixed asset investment in a machine of $160,000 with the machine to be depreciated straight-line to zero over its four-year tax life (i.e. fully depreciated with no book value at the end of four years). An initial investment in net working capital (NWC) of $90,000 will also need to be paid, with the assumption that the NWC will be returned to the firm in full at the end of year four. The project is estimated to generate $XXX,XXX [your student ID*] in annual sales. It is estimated that 45,000 units will be produced each year and the cost per unit (excluding depreciation expense) will come to $10. At the end of the four years it is estimated the machine could be removed from the factory and sold for $30,000. The tax rate is 30% and the required rate of return on the project is 8%. * please use your student ID as the sales figure for each year – for example if your student ID was 123456, your annual sales figure would be $123,456. Required: (Please draw up a table to assist with the calculations and formatting of answer. Please show all workings to maximise marks). A. Calculate the total project cash flows for the new product line. (3.5 marks) B. Calculate the Net Present Value (NPV) of the proposed investment. C. Based on the NPV calculated in part B above would you advise Murphy to accept or reject the project and provide a reason why? (1.5 mark) D. Calculate the payback period for this project and advise whether Murphy Should use the payback period as the primary criteria for evaluating projects. (1 mark)

use number 515659

The Bruin's Den Outdoor Gear is considering a new 7-year project to produce a new tent line. The equipment necessary would cost $1.75 million and be depreciated using straight-line depreciation to a book value of zero. At the end of the project, the equipment can be sold for 10 percent of its initial cost. The company believes that it can sell 28,000 tents per year at a price of $73 and variable costs of $33 per tent. The fixed costs will be $485,000 per year. The project will require an initial investment in net working capital of $229,000 that will be recovered at the end of the project. The required rate of return is 11.6 percent and the tax rate is 35 percent. What is the NPV?

Multiple Choice

• $441,178

• $1,209,473

• $615,031

• $797,752

• $492,246

Atlantis Manufacturing Corp. is considering a new line of office furniture. New equipment required to manufacture the product cost $750.000 to purchase and an additional $50,000 in shipping and installation expenses. The equipment will be housed in space currently unused by the company and will be depreciated on a MACRS four-year schedule over the project's four-year economic life, with rates of 33 percent 45 percent 15 percent and 7 percent for Years 1 through 4. The equipment's expected salvage value is negligible. Revenues are expected to be $380,000 per year and operating expenses excluding depreciation are expected to total $60.000 per year. Atlantis Manufacturings marginal tax rate is 25 percent and its cost of capital is 13 percent. No additional investments in working capital are required. Calculate the project's net present value (NPV) and internal rate of return (IRR).Should Atlantis produce this product?

Imagine that you buy a new computer system with independent components including a new desktop computer (with a CPU and a graphics card), new software, and a new monitor. You want to play games on the new system, but it runs games very slowly. You assume that the keyboard and mouse are not creating the problem; so, to figure out what is making the system run so slowly, you experiment with combinations of your old equipment with the new equipment. Here are your experiments and results:

Experiment 1: New computer, new software, and new monitor — and it runs slowly.
Experiment 2: New computer, new software, and old monitor — and it runs slowly.
Experiment 3: New computer, old software, and new monitor — and it runs fast.
Experiment 4: New computer, old software, and old monitor — and it runs fast.
Experiment 5: Old computer, new software, and new monitor — and it runs fast.
Experiment 6: Old computer, new software, and old monitor — and it slowly.
Experiment 7: Old computer, old software, and new monitor — and it runs fast.
Experiment 8: Old computer, old software, and old monitor — and it runs fast.

Based on this data, which experiment shows that the conjunction of new computer and the old monitor is NOT SUFFICIENT for the system to run slowly?