Explain the concept of incremental cash flow analysis

Assignment Help Corporate Finance
Reference no: EM13200657

QUESTION 1

Jarum Industrial Tools is considering a 3-year project to improve its production efficiency. Buying a new machine press for RM611,000 is estimated to result in RM193,000 in annual pretax cost savings. The press falls in the MACRS five-year class (Table 1), and it will have a salvage value at the end of the project of RM162,000. The press also requires an initial investment in spare parts inventory of RM19,000, along with an additional RM2,000 in inventory for each succeeding year of the project. If the tax rate is 35 percent and the discount rate is 12 percent, should the company buy and install the machine press? Why or why not?Table 1: Modified ACRS depreciation allowances

427_Explain the concept of incremental cash flow analysis.png

QUESTION 2

a) Explain the concept of incremental cash flow analysis and its purpose.

b) Explain the difference between a sunk cost and an opportunity cost and give an example of each.

QUESTION 3

Chong Motors just issued 225,000 zero coupon bonds. These bonds mature in 20 years, have a par value of RM1, 000, and have a yield to maturity of 7.45 percent. What is the approximate total amount of money the company raised from issuing these bonds? (Assume semi-annual compounding)

Reference no: EM13200657

Questions Cloud

State the shape of the cable that supports the roadway : What is the shape of the cable that supports the roadway of a suspension bridge? Our model is based on the following simplifying instructions
How would adjustments affect the slope of aggregate supply : In the short run, prices may rise faster than costs. This chapter discusses why this might happen. Suppose that labor and management agree to adjust wages continuously for any changes in the price level.
How much will he have to invest today to reach goal : Jim Smith believes in 30 years he will need $80,000 to buy a retirement cottage. Assuming he gets an interest rate of 9% compounded annually, how much will he have to invest today to reach his retirement goal?
Explaining behavior is easy-when we lack something : Your psychology professor tells you, "Explaining behavior is easy! When we lack something, we are motivated to get it." Which approach to motivation does your professor subscribe to?
Explain the concept of incremental cash flow analysis : Explain the concept of incremental cash flow analysis and its purpose and explain the difference between a sunk cost and an opportunity cost and give an example of each.
The type of the wireless internet service : Wireless high speed internet is provided for free in the airport of the city of communityville. At first, only a few people use the service. What type a good is this and why.
Where is the economy operating relative to potential gdp : What is the relationship between potential output and the natural rate of unemployment If the economy currently has a frictional unemployment rate of 2 percent, structural unemployment of 2 percent, seasonal unemployment of 0.5 percent
Childern learning to play percussion instrument : Define how you might contribute a lesson given to a group of 7 year old childern learning to play percussion instrument.
Role of servant to their constituents : In the role of servant to their constituents, members of congress:

Reviews

Write a Review

Corporate Finance Questions & Answers

  Calculation of standard deviation

The following are the historic returns for Chelle Computer Corporation. Determine the correlation coefficient between Chelle Computer and General Index and also calculate the standard deviation.

  Economic variables to identify long term financial goals

Suppose that Nike Corporation is expanding globally. One way to increase globally is to purchase shares of other firms, while other way is to open up new branches.

  Analyze the concepts of financial ratios

Financial ratios by themselves provide very little data about a company. We need to compare ratios across company's in similar industry sectors. The two methods for analyzing financial ratios for a company are:

  Application of weighted average cost of capital

How the application of weighted average cost of capital (WACC) would be applied to each method and how companies assess the feasibility of a project according to these valuation methodologies

  Determine the expected return on portfolio

Suppose there is no firm specific risk and the risk premiums are 5.3%, 3.9%, and 4.2% ; use the data below to find:

  Find the value of preferred stock

XYZ Company issued common stock that had a required rate of return of 12 percent, the stocks beta is 1.75, next dividend is expected to be dollar 2.50 & the risk free rate of return is 5 percent.

  Build a solar power plant in belarus

Build a solar power plant in Belarus. The assignment is to make financial statements (income statement, balance sheet, statement of cash flows) for three years for this business. The first year by month, the second and third year by quarter.

  What is the future value of these cash flows

If the company uses an 8 percent discount rate and what is the future value of these cash flows at the end of year 4?

  Create a decision tree

Mark is looking at the predict of expected economic growth. He plans to invest 120,000 dollar in an investment whose return would depend on the economic conditions.

  Evaluate what is the financial break-even level

Evaluate what is the financial break-even level for the project and what is the accounting break-even level for the project?

  Calculate the internal rate of return for project

Calculate the internal rate of return for project 4. Why is the result an error - What if you only had $12,000 in year 0, and the cost of borrowing additional money was prohibitively high?

  Calculate the apr of investment

You purchased a stock 3 months ago for $32.81 per share. The stock paid no dividends. The current share value is $37.53. Calculate the APR of your investment?

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd