Photochronograph Corporation (PC) manufactures time series photographic equipment. It is currently at its target debt−equity ratio of .80. It’s considering building a new $50 million manufacturing facility. This new plant is expected to generate aftertax cash flows of $6.2 million in perpetuity. The company raises all equity from outside financing. There are three financing options: 1. A new issue of common stock: The flotation costs of the new common stock would be 8 percent of the amount raised. The required return on the company’s new equity is 14 percent. 2. A new issue of 20-year bonds: The flotation costs of the new bonds would be 4 percent of the proceeds. If the company issues these new bonds at an annual coupon rate of 8 percent, they will sell at par. 3. Increased use of accounts payable financing: Because this financing is part of the company’s ongoing daily business, it has no flotation costs, and the company assigns it a cost that is the same as the overall firm WACC. Management has a target ratio of accounts payable to long-term debt of .15. (Assume there is no difference between the pretax and aftertax accounts payable cost.) What is the NPV of the new plant? Assume that PC has a 35 percent tax rate. (Enter your answer in dollars, not millions of dollars, i.e. 1,234,567. Do not round intermediate calculations and round your final answer to the nearest whole dollar amount.)

Photochronograph Corporation (PC) manufactures time series photographic equipment. It is currently at its target debt−equity ratio of .80. It’s considering building a new $50 million manufacturing facility. This new plant is expected to generate aftertax cash flows of $6.2 million in perpetuity. The company raises all equity from outside financing. There are three financing options: 1. A new issue of common stock: The flotation costs of the new common stock would be 8 percent of the amount raised. The required return on the company’s new equity is 14 percent. 2. A new issue of 20-year bonds: The flotation costs of the new bonds would be 4 percent of the proceeds. If the company issues these new bonds at an annual coupon rate of 8 percent, they will sell at par. 3. Increased use of accounts payable financing: Because this financing is part of the company’s ongoing daily business, it has no flotation costs, and the company assigns it a cost that is the same as the overall firm WACC. Management has a target ratio of accounts payable to long-term debt of .15. (Assume there is no difference between the pretax and aftertax accounts payable cost.) What is the NPV of the new plant? Assume that PC has a 35 percent tax rate. (Enter your answer in dollars, not millions of dollars, i.e. 1,234,567. Do not round intermediate calculations and round your final answer to the nearest whole dollar amount.)

Retlaw Corporation (RC) manufactures time-series photographic equipment. It is currently at its target debt–equity ratio of 0.77. It’s considering building a new $57 million manufacturing facility. This new plant is expected to generate after-tax cash flows of $8.6 million in perpetuity. The company raises all equity from outside financing. There are three financing options:

1. A new issue of common stock: The flotation costs of the new common stock would be 9% of the amount raised. The required return on the company’s new equity is 15%.
2. A new issue of 20-year bonds: The flotation costs of the new bonds would be 4% of the proceeds. If the company issues these new bonds at an annual coupon rate of 8.0%, they will sell at par.
3. Increased use of accounts payable financing: Because this financing is part of the company’s ongoing daily business, it has no flotation costs, and the company assigns it a cost that is the same as the overall firm WACC. Management has a target ratio of accounts payable to long-term debt of 0.210. (Assume there is no difference between the pre-tax and after-tax accounts payable cost.)

What is the NPV of the new plant? Assume that RC has a 25% tax rate. (Enter the answer in dollars. Do not round intermediate calculations. Round the WACC percentage to 2 decimal places. Round the final answer to 2 decimal places. Omit $ sign in your response.)

NPV ?    $

Photochronograph Corporation (PC) manufactures time series photographic equipment. It is currently at its target debt?equity ratio of .85. It’s considering building a new $43 million manufacturing facility. This new plant is expected to generate aftertax cash flows of $5.5 million in perpetuity. The company raises all equity from outside financing. There are three financing options:

1. A new issue of common stock: The flotation costs of the new common stock would be 7.3 percent of the amount raised. The required return on the company’s new equity is 13 percent.

2. A new issue of 20-year bonds: The flotation costs of the new bonds would be 4.0 percent of the proceeds. If the company issues these new bonds at an annual coupon rate of 7 percent, they will sell at par.

3. Increased use of accounts payable financing: Because this financing is part of the company’s ongoing daily business, it has no flotation costs, and the company assigns it a cost that is the same as the overall firm WACC. Management has a target ratio of accounts payable to long-term debt of .20. (Assume there is no difference between the pretax and aftertax accounts payable cost.)

What is the NPV of the new plant? Assume that PC has a 40 percent tax rate. (Enter your answer in dollars, not millions of dollars, e.g. 1,234,567. Do not round intermediate calculations and round your final answer to the nearest whole dollar amount, e.g., 32.)

Photochronograph Corporation (PC) manufactures time series photographic equipment. It is currently at its target debt−equity ratio of .80. It’s considering building a new $45 million manufacturing facility. This new plant is expected to generate aftertax cash flows of $5.7 million in perpetuity. The company raises all equity from outside financing. There are three financing options: 1. A new issue of common stock: The flotation costs of the new common stock would be 7.5 percent of the amount raised. The required return on the company’s new equity is 14 percent. 2. A new issue of 20-year bonds: The flotation costs of the new bonds would be 5 percent of the proceeds. If the company issues these new bonds at an annual coupon rate of 8 percent, they will sell at par. 3. Increased use of accounts payable financing: Because this financing is part of the company’s ongoing daily business, it has no flotation costs, and the company assigns it a cost that is the same as the overall firm WACC. Management has a target ratio of accounts payable to long-term debt of .15. (Assume there is no difference between the pretax and aftertax accounts payable cost.) What is the NPV of the new plant? Assume that PC has a 35 percent tax rate. (Enter your answer in dollars, not millions of dollars, e.g., 1,234,567. Do not round intermediate calculations and round your answer to the nearest whole dollar amount, e.g., 32.)

What is NPV

Photochronograph Corporation (PC) manufactures time series photographic equipment. It is currently at its target debt-equity ratio of .85. It’s considering building a new $48 million manufacturing facility. This new plant is expected to generate aftertax cash flows of $5.2 million in perpetuity. The company raises all equity from outside financing. There are three financing options: 1. A new issue of common stock: The flotation costs of the new common stock would be 7 percent of the amount raised. The required return on the company’s new equity is 13 percent. 2. A new issue of 20-year bonds: The flotation costs of the new bonds would be 2.6 percent of the proceeds. If the company issues these new bonds at an annual coupon rate of 5.5 percent, they will sell at par. 3. Increased use of accounts payable financing: Because this financing is part of the company’s ongoing daily business, it has no flotation costs and the company assigns it a cost that is the same as the overall firm WACC. Management has a target ratio of accounts payable to long-term debt of .20. Assume there is no difference between the pretax and aftertax accounts payable costs. What is the NPV of the new plant? Assume that PC has a 25 percent tax rate. (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to the nearest whole dollar amount, e.g., 1,234,567.)

Lancaster Corporation (replacement decision analysis) The Lancaster Corporation purchased a piece of equipment three years ago for $250,000. It has an asset depreciation range (ADR) midpoint of eight years (i.e. use the 5-year MACRS schedule). The old equipment can be sold for $97,920. A new piece of equipment can be purchased for $360,000. It also has an ADR of eight years (again, use the 5-year MACRS schedule). Assume the old and new equipment would provide the following operating gains (or losses) over the next six years.

Year New Equipment Old Equipment

1............... $100,000 $36,000

2............... 86,000 26,000

3............... 80,000 19,000

4............... 72,000 18,000

5............... 62,000 16,000

6............... 43,000 (9,000)

The firm has a 36 percent tax rate and a 9 percent cost of capital.

a. Calculate the book value of the existing equipment.

b. Calculate the net cost of the new equipment.

c. Prepare a depreciation schedule for the new equipment.

d. Prepare a depreciation schedule for the remaining three years on the existing equipment.

e. Prepare a schedule of incremental depreciation and tax shield benefits if the firm were to purchase the new equipment.

f. Prepare a schedule of after-tax savings that would result from the purchase of the new equipment.

g. Calculate the Net Present Value (NPV) of the investment in the new equipment.

h. Should the new equipment be purchased to replace the old equipment?

Photochronograph Corporation (PC) manufactures time series photographic equipment. It is currently at its target debt?equity ratio of .85. It’s considering building a new $58 million manufacturing facility. This new plant is expected to generate aftertax cash flows of $7 million in perpetuity. The company raises all equity from outside financing. There are three financing options: 1. A new issue of common stock: The flotation costs of the new common stock would be 8.8 percent of the amount raised. The required return on the company’s new equity is 13 percent. 2. A new issue of 20-year bonds: The flotation costs of the new bonds would be 4.0 percent of the proceeds. If the company issues these new bonds at an annual coupon rate of 7 percent, they will sell at par. 3. Increased use of accounts payable financing: Because this financing is part of the company’s ongoing daily business, it has no flotation costs, and the company assigns it a cost that is the same as the overall firm WACC. Management has a target ratio of accounts payable to long-term debt of .20. (Assume there is no difference between the pretax and aftertax accounts payable cost.) What is the NPV of the new plant? Assume that PC has a 40 percent tax rate. (Enter your answer in dollars, not millions of dollars, e.g. 1,234,567. Do not round intermediate calculations and round your final answer to the nearest whole dollar amount, e.g., 32.) NPV $

Company ABC produces toys for many shops. Due to its excess capacity, the company tries to start a new product line to manufacture a new toy car model. The company has gathered the following information on the product line from which the company can make 1,000 toy cars. For each toy car, the direct materials cost $60, direct labor costs $40, and total manufacturing overhead costs $20. Due to the excess capacity, producing the new toy car has no impact on fixed manufacturing overhead. However, a total of $10,000 fixed manufacturing overhead is absorbed by this new product line under the company’s absorption costing system.

1. What is total variable cost for producing each unit of toy car?
2. The company is considering renting a new equipment to produce the new toy cars. The rental fee for producing 1,000 toy cars is $40,000. The new equipment will effectively reduce each toy’s direct labor cost by 30%, direct materials cost by 50%, and variable manufacturing overhead by 50%. Is it worthwhile for the company to rent the new equipment?
3. The company’s accountant has successfully traced many costs to each unit of the new toy car. She also wonders whether she should simply record all of the traceable costs as relevant costs. What is your opinion? Please support your answer with explanation.