Reference no: EM131014919
1. Who Dat Restaurant is considering the purchase of a $27,000 soufflé maker. The soufflé maker has an economic life of six years and will be fully depreciated by the straight-line method. The machine will produce 2,300 soufflés per year, with each costing $2 to make and priced at $7. Assume that the discount rate is 14 percent and the tax rate is 34 percent. Should the company make the purchase?
2. Down Under Boomerang, Inc. is considering a new three-year expansion project that requires an initial fixed asset investment of $4,200,000. The fixed asset will be depreciated straight-line to zero over its three-year tax life, after which time it will be worthless. The project is estimated to generate $3,450,000 in annual sales, with costs of $1,612,500. The tax rate is 35 percent and the required return is 10 percent. What is the project’s NPV?
3. Symon Meats is looking at a new sausage system with an installed cost of $245,000. The cost will be depreciated straight-line to zero over the project’s five-year life, at the end of which the sausage system can be scrapped for $30,000. The sausage system will save the firm $85,000 per year in pretax operating costs, and the system requires an initial investment in net working capital of $13,000. If the tax rate is 34 percent and the discount rate is 10 percent, what is the NPV of this project?
4. An asset is used in a four-year project falls in the five-year MACRS class for tax purposes. The asset has an acquisition cost of $8,600,000 and will be sold for $1,890,000 at the end of the project. If the tax rate is 35 percent, what is the after-tax salvage value of the asset?
5. Consider the following cash flows on two mutually exclusive projects. Year Project A Project B 0 -54,000 -64,000 1 26,000 29,000 2 32,000 38,000 3 19,000 23,000 The cash flows of Project A are expressed in real terms which those of Project B are expressed in nominal terms. The appropriate nominal discount rate is 11 percent and the inflation rate is 4 percent. Which project should you choose?
6. A proposed cost-saving device has an installed cost of $690,000. The device will be used in a five-year project but is classified as three-year MACRS property for tax purposes. The required initial net working capital investment is $40,000, the marginal tax rate is 35 percent, and the project discount rate is 12 percent. The device has an estimated year 5 salvage value of $65,000. What level of pretax cost savings do we require for this project to be profitable?
|
What is the profitability index for above set of cash flow
: What is the profitability index for the above set of cash flows if the relevant discount rate is 8 percent? What is the profitability index if the discount rate is 13 percent?
|
|
How much heat is transferred this process
: The initial pressure is 10 bar, and the initial molar volume is 3 3 1023 m3/mol, and the final volume is 0.05 m3/mol. Take the temperature of the surroundings to be 298 K. Use the van der Waals equation of state and What is the initial temper..
|
|
Supplier offers to supply component at an annual payment
: Betty's Home Décor is considering whether to produce a component in-house or whether to purchase it from a supplier. A supplier offers to supply the component at an annual payment of $120,000 over three years (payable at the beginning of years 2, 3, ..
|
|
How much work is done on the system
: One mole of methane in a piston-cylinder assembly undergoes an adiabatic compression from an initial state 1 P1 5 0.5 bar, v1 5 0.05 m3/mol 2 to a final state 1 P2 5 10 bar, v2 5 3 3 1023 m3/mol 2 . Use the van der Waals equation of state for noni..
|
|
What is the after-tax salvage value of the asset
: An asset is used in a four-year project falls in the five-year MACRS class for tax purposes. The asset has an acquisition cost of $8,600,000 and will be sold for $1,890,000 at the end of the project. If the tax rate is 35 percent, what is the after-t..
|
|
Journalize the following merchandise transactions
: Journalize the following merchandise transactions. Refer to the Chart of Accounts for exact wording of account titles.
|
|
Economy probability of state of economy portfolio return
: Consider the following information: State of Economy Probability of State of Economy Portfolio Return If State Occurs Recession .20 − .16 Normal .45 .17 Boom .35 .25 Calculate the expected return. (Do not round intermediate calculations. Enter your a..
|
|
Act of fraud prove intent
: Doesn't the act of fraud prove intent? [U.S. v Ebbers, 458 F.3d 110 (C.A. 2nd 2006), cert. den. 127 S.Ct. 1483 (2007)]
|
|
Two bonds should offer the same annual effective rate
: AAA firm’s semiannual bond has 12 years maturity and coupon rate of 8.75% semiannually. The firm also sells annual bonds with all the same condition except the coupon is paid annually (means ytm is the same). What is the price of this annual coupon b..
|