Reference no: EM13729282
1. Given that each of the three corporate transportation alternatives covers a different length of time, what time period should be used to compare these options?
2. What is the annual depreciation expense that Monkey Manufacturing may claim against taxable income under each of the three travel options?
3. Does each of the three travel options contain a different risk level? If so, how should the analyst incorporate the risk differential within the capital budgeting analysis? Be sure to identify the appropriate discount rate necessary to evaluate each alternative in answer, and explain your selection of each particular discount rate.
4. Should the capital budgeting analysis include the forecast inflation rates shown in Table 1? If so, demonstrate how each of these inflation factors will affect the various cash flows in the capital budgeting analysis.
5. What is the net salvage value that Monkey Manufacturing can expect to receive from (a) the aircraft purchase option, and (b) the aircraft time share option?
6. Based on your answer to question 1 through 8, prepare a schedule of corporate cash flows relevant to each of the three travel alternatives, and calculate the present value of the total cost of each option. In developing the cash flows, assume that capital expenditures necessary to fund a change in Monkey Manufacturing travel policy occur in the current period (Year 0) and all operating expenditure begins in the next fiscal year (Year 1).
7. In question 6, should the analyst focus on before tax or after tax cash flows? Why?
8. Is Sebastian Henry's assessment of the risk level of each travel alternative sufficient justification for the financial analysis to apply different discount rates to each of the three travel alternatives? Why or why not?
|
Compute weighted average cost of capital if firms tax rate
: Sirom Scientific Solution has $10 million of outstanding equity and $10 million of bank debt. The bank debt costs 7% per year. The estimated equity beta is 2. IF the market risk premium is 8%, and the risk -free rate is 5%, compute the weighted avera..
|
|
Calculate the value index for each car
: You have just graduated from college and are looking to buy your first car. Money is tight right now, so you are concerned with initial cost as well as ongoing expenses. Which car provides you with the greatest value? Use formulas to calculate the ..
|
|
What kinds of techniques we use to collect information
: What kinds of techniques we use to collect information from respondents
|
|
Expansionary to a contractionary monetary policy
: A bakery invests $34,000 in a light delivery truck. This was depreciated using the 5 years MACRS schedule shown above. If the company sold it immediately after the end of year 2 for $21,000. What would be the after-tax cash flow from sale of this ass..
|
|
Cash flows in the capital budgeting analysis
: What is the annual depreciation expense that Monkey Manufacturing may claim against taxable income under each of the three travel options - What is the net salvage value that Monkey Manufacturing can expect to receive
|
|
Explain the marketing communications objectives
: Case Study: The information in the Case Study is used each week when writing the individual sections of the Marketing Communications Plan. Explain the marketing communications objectives
|
|
Expect to earn an average return
: Janice plans to save 75$ per month, starting today, for 20 years. Kate plans to save 80$ a month for 20 years, starting one month from today. Both Hanice and kate expect to earn an average return of 5.5 percent on their savings. At the end of the 20 ..
|
|
Define the maximum number of doughnuts
: Describe what would be the capacity of the doughnut production operation that you are envisioning. In other words, describe what would define the maximum number of doughnuts that you could produce per hour.
|
|
Calculate free cash flow for 2003
: Calculate free cash flow for 2003 and calculate net payments to debt holders and issuers for 2003.
|