Considering adding new line of craft beers to product mix

Assignment Help Financial Management

Reference no: EM132071722

1. A brewery is considering adding a new line of craft beers to its product mix. The new beer will require additional brewing and bottling capacity at a cost of $15 million, but is expected to generate new sales of $5 million per year for the next 5 years. If the brewery has a cost of capital of 6%, what is the NPV of this investment?

A. $8.6 million

B. $15 million

C. $3.7 million

D. $6.1 million

E. $10 million

2. Longbow Lumber is purchasing a new horizontal resaw at a cost of $390,000. There is an additional $20,000 delivery and installation cost. The machine has a capital cost allowance (CCA) rate of 15%. What will be the CCA deduction for year 1?

A. $61,500

B. $29,250

C. $30,750

D. $205,000

E. $195,000

3. A restaurant invests $240,000 in a new food truck for mobile lunch sales. The truck will have a capital cost allowance (CCA) rate of 20%. If the opportunity cost of capital is 8.5%, and the restaurant's marginal tax rate is 30%, what is the present value of the CCA tax shield?

A. $48,000

B. $48,547

C. $35,938

D. $14,400

E. $50,526

Reference no: EM132071722

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