| Year | Cash Flow |
| 0 | $2,000 |
| 1 | $2,000 |
| 2 | $0 |
| 3 | $1,500 |
| 4 | $2,500 |
| 5 | $4,000 |
In: Finance
|
O'Bannon Electronics has an investment opportunity to produce a new HDTV. The required investment on January 1 of this year is $190 million. The firm will depreciate the investment to zero using the straight-line method over four years. The investment has no resale value after completion of the project. The firm is in the 34 percent tax bracket. The price of the product will be $535 per unit, in real terms, and will not change over the life of the project. Labor costs for Year 1 will be $15.85 per hour, in real terms, and will increase at 2 percent per year in real terms. Energy costs for Year 1 will be $4.20 per physical unit, in real terms, and will increase at 3 percent per year in real terms. The inflation rate is 5 percent per year. Revenues are received and costs are paid at year-end. Refer to the following table for the production schedule: |
| Year 1 | Year 2 | Year 3 | Year 4 | |||||
| Physical production, in units | 155,000 | 165,000 | 185,000 | 175,000 | ||||
| Labor input, in hours | 1,160,000 | 1,240,000 | 1,400,000 | 1,320,000 | ||||
| Energy input, physical units | 250,000 | 270,000 | 290,000 | 275,000 | ||||
|
The real discount rate for the project is 4 percent. |
Calculate the NPV of this project. (Enter your answer in dollars, not millions of dollars, e.g., 1,234,567. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
In: Finance
Miglietti Restaurants is looking at a project with the following forecasted sales: first-year sales quantity of 35,000, with an annual growth rate of 4.00% over the next ten years. The sales price per unit will start at $42.00 and will grow at 2.00% per year. The production costs are expected to be 55% of the current year's sales price. The manufacturing equipment to aid this project will have a total cost (including installation) of $2,500,000. It will be depreciated using MACRS, and has a seven-year MACRS life classification. Fixed costs will be $360,000 per year. Miglietti Restaurants has a tax rate of 40%. What is the operating cash flow for this project over these ten years? Find the NPV of the project for Miglietti Restaurants if the manufacturing equipment can be sold for $140,000 at the end of the ten-year project and the cost of capital for this project is 9%. What is the operating cash flow for this project in year 1? MACRS Fixed Annual Expense Percentages by Recovery Class Click on this icon to download the data from this table
Year 3-Year 5-Year 7-Year 10-Year 1 33.33% 20.00% 14.29% 10.00% 2 44.45% 32.00% 24.49% 18.00% 3 14.81% 19.20% 17.49% 14.40% 4 7.41% 11.52% 12.49% 11.52% 5 11.52% 8.93% 9.22% 6 5.76% 8.93% 7.37% 7 8.93% 6.55% 8 4.45% 6.55% 9 6.55% 10 6.55% 11 3.28%
In: Finance
|
O'Bannon Electronics has an investment opportunity to produce a new HDTV. The required investment on January 1 of this year is $190 million. The firm will depreciate the investment to zero using the straight-line method over four years. The investment has no resale value after completion of the project. The firm is in the 34 percent tax bracket. The price of the product will be $535 per unit, in real terms, and will not change over the life of the project. Labor costs for Year 1 will be $15.85 per hour, in real terms, and will increase at 2 percent per year in real terms. Energy costs for Year 1 will be $4.20 per physical unit, in real terms, and will increase at 3 percent per year in real terms. The inflation rate is 5 percent per year. Revenues are received and costs are paid at year-end. Refer to the following table for the production schedule: |
| Year 1 | Year 2 | Year 3 | Year 4 | |||||
| Physical production, in units | 155,000 | 165,000 | 185,000 | 175,000 | ||||
| Labor input, in hours | 1,160,000 | 1,240,000 | 1,400,000 | 1,320,000 | ||||
| Energy input, physical units | 250,000 | 270,000 | 290,000 | 275,000 | ||||
| The real discount rate for the project is 4 percent. |
|
Calculate the NPV of this project. (Enter your answer in dollars, not millions of dollars, e.g., 1,234,567. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) |
| NPV |
$ |
In: Finance
(1) You are evaluating shares in Chevron (CVX). They expect to pay an annual dividend of $8.00 per share next year and expect to increase that by 4% every year. If you use a discount rate of 10%, what is the value of the shares?
I got 104, but it's wrong
(2) You are evaluating shares in Ford Motor (F). They expect to pay an annual dividend of $10.50 per share next year and expect to increase that by 2% every year. If you use a discount rate of 10%, what is the value of the shares?
I got 133.86, but that was wrong
(3) You are evaluating shares in Lyft (LYFT). They currently pay an annual dividend of $10.00 per share this year but expect to increase this payout by 10% next year and the following year. Then, as the company matures, it expects that dividends will only grow by 5% per year thereafter. If you use of discount rate of 20%, what is the value of the shares?
I got 61.65, but wrong
(4) You are evaluating shares in Schlumberger (SLB). They currently pay an annual dividend of $5.50 per share this year but expect to increase this payout by 5% next year and the two following years. Then, as the company matures, it expects that dividends will grow by 2% per year thereafter. If you use of discount rate of 12%, what is the value of the shares?
I got 53.03, but wrong
Any help with these problems?
In: Finance
Calculate the NPV for each project and determine which project should be accepted.
| Project A | Project B | Project C | Project D | |
| Inital Outlay | (105,000.000) | (99,000.00) | (110,000.00) | (85,000.00) |
| Inflow year 1 | 53,000.00 | 51,000.00 | 25,000.00 | 45,000.00 |
| Inflow year 2 | 50,000.00 | 47,000.00 | 55,000.00 | 50,000.00 |
| Inflow year 3 | 48,000.00 | 41,000.00 | 15,000.00 | 30,000.00 |
| Inflow year 4 | 30,000.00 | 52,000.00 | 21,000.00 | 62,000.00 |
| Inflow year 5 | 35,000.00 | 40,000.00 | 35,000.00 | 68,000.00 |
| Rate | 7% | 10% | 13% | 18% |
Your company is considering three independent projects. Given the following cash flow information, calculate the payback period for each. If your company requires a three-year payback before an investment can be accepted, which project(s) would be accepted?
| Project D | Project E | Project F | |
| Cost | 205,000.00 | 179,000.00 | 110,000.00 |
| Inflow year 1 | 53,000.00 | 51,000.00 | 25,000.00 |
| Inflow year 2 | 50,000.00 | 87,000.00 | 55,000.00 |
| Inflow year 3 | 48,000.00 | 41,000.00 | 21,000.00 |
| Inflow year 4 | 30,000.00 | 52,000.00 | 9,000.00 |
| Inflow year 5 | 24,000.00 | 40,000.00 | 35,000.00 |
Using market value and book value (separately), find the adjusted WACC, using 30% tax rate.
| Component | Balance Sheet Value | Market Value | Cost of Capital |
| Debt | 5,000,000.00 | 6,850,000.00 | 8% |
| Preferred Stock | 4,000,000.00 | 2,200,00.00 | 10% |
| Common Stock | 2,000,000.00 | 5,600,000.00 | 13% |
In: Finance
Depreciation by Two Methods; Sale of Fixed Asset
New tire retreading equipment, acquired at a cost of $812,500 on September 1 at the beginning of a fiscal year, has an estimated useful life of five years and an estimated residual value of $69,900. The manager requested information regarding the effect of alternative methods on the amount of depreciation expense each year. On the basis of the data presented to the manager, the double-declining-balance method was selected.
In the first week of the fifth year, on September 6, the equipment was sold for $119,000.
Required:
1. Determine the annual depreciation expense for each of the estimated four years of use, the accumulated depreciation at the end of each year, and the book value of the equipment at the end of each year by the following methods:
a. Straight-line method
| Year | Depreciation Expense |
Accumulated Depreciation, End of Year |
Book Value, End of Year |
| 1 | $ | $ | $ |
| 2 | $ | $ | $ |
| 3 | $ | $ | $ |
| 4 | $ | $ | $ |
| 5 | $ | $ | $ |
b. Double-declining-balance method
| Year | Depreciation Expense |
Accumulated Depreciation, End of Year |
Book Value, End of Year |
| 1 | $ | $ | $ |
| 2 | $ | $ | $ |
| 3 | $ | $ | $ |
| 4 | $ | $ | $ |
| 5 | $ | $ | $ |
2. Journalize the entry to record the sale, assuming double-declining-balance method is used. If an amount box does not require an entry, leave it blank.
3. Journalize the entry to record the sale in (2), assuming that the equipment was sold for $102,100 instead of $119,000. If an amount box does not require an entry, leave it blank.
In: Accounting
XYZ, Inc. is considering a 5-year project. The production will require $1,500,000 in net working capital to start and addition net working capital investments each year equal to 15% of the projected sales increase for the following year. Total fixed costs are $1,350,000 per year, variable production costs are $225 per unit, and the units are priced at $345 each. The equipment needed to begin production has an intalled cost of $23,000,000. The equipment is qualified as seven-year MACRS property. MACRS stands for Modified Accelerated Cost Recovery System, where businesses apply MACRS rates to the capital expenditure for annual depreciation amount. In five years, this equipment can be sold for about $4,600,000. The company is in the 35% marginal tax bracket and has a required rate of return on all its projects of 18%. Projected Unit Sales Year 1 - 80000 Year 2 - 85000 Year 3 - 90000 Year 4 - 95000 Year 5 - 95000 What would the depreciation,EBIT, Taxes, and NI estimation table for years 1-5?
Input Area
Year 1 2 3
4 5 6 7 8
Projected unit sales 80,000
85,000 90,000 95,000
95,000 0 0 0
MACRS Rates 14.29% 24.49%
17.49% 12.49% 8.93%
8.92% 8.93% 4.46%
In: Accounting
Sugar Land Company is considering adding a new line to its
product mix, and the capital budgeting analysis is being conducted
by a MBA student. The production line would be set up in unused
space (Market Value Zero) in Sugar Land’ main plant. Total cost of
the machine is $350,000. The machinery has an economic life of 4
years and will be depreciated using MACRS for 3-year property
class. The machine will have a salvage value of $35,000 after 4
years.
The new line will generate Sales of 1,750 units per year for 4
years and the variable cost per unit is $110 in the first year.
Each unit can be sold for $210 in the first year. The sales price
and variable cost are expected to increase by 3% per year due to
inflation. Further, to handle the new line, the firm’s net working
capital would have to increase by $30,000 at time zero (No change
in NWC in years 1 through 3 and the NWC will be recouped in year
4). The firm’s tax rate is 40% and its weighted average cost of
capital is 11%.
Estimate annual (Year 1 through 4) operating cash flows
|
Year 1 |
Year 2 |
Year 3 |
Year 4 |
|
|
Tot Sales |
||||
|
Var. Cost |
||||
|
Depreciation |
||||
|
EBIT |
||||
|
Taxes |
||||
|
Net Income |
||||
|
Depreciation |
||||
|
OCF |
In: Finance
Nicole’s Getaway Spa (NGS) purchased a hydrotherapy tub system to add to the wellness programs at NGS. The machine was purchased at the beginning of the year at a cost of $9,500. The estimated useful life was five years and the residual value was $500. Assume that the estimated productive life of the machine is 10,000 hours. Expected annual production was year 1, 2,200 hours; year 2, 2,300 hours; year 3, 2,400 hours; year 4, 2,100 hours; and year 5, 1,000 hours.
Assume NGS sold the hydrotherapy tub system for $2,850 at the end of year 3.The following amounts were forecast for year 3: Sales Revenues $43,000; Cost of Goods Sold $34,000; Other Operating Expenses $4,300; and Interest Expense $900. Create an income statement for year 3 for each of the different depreciation methods, ending at Income before Income Tax Expense. (Don't forget to include a loss or gain on disposal for each method.).
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
In: Accounting