Explain the concept of incremental cash flow analysis

Assignment Help Finance Basics
Reference no: EM13882796

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

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: EM13882796

Questions Cloud

What is coefficient of variation : Stock X has an expected return of 0.11. It has a beta estimated at 1, a risk-free rate of 0.03 and a risk premium of 6.1. Its variance of returns is 0.0209. All returns here are expressed as decimals, not percentages. What is its coefficient of varia..
Provide an example of an environmental tax : 1.Provide an example of an environmental tax or marketable permit instrument that has been used in Canada. Evaluate the instrument in terms of its efficiency (or cost-effectiveness), equity, enforceability, and incentives created for polluters to inn..
List the problems with the existing system at brock : List the problems with the existing system at Brock Identify the relevant information that the production and inventory managers need to accumulate in order to support the decision to automate the conversion process.
Discounted payback period if the required rate of return : A project has an initial cost of $8,700 and produces cash inflows of $2,600, $5,000, and $1,600 over the next three years, respectively. What is the discounted payback period if the required rate of return is 7 percent?
Explain the concept of incremental cash flow analysis : Explain the concept of incremental cash flow analysis and its purpose
Sample proportions distribution with normal distribution : About 74% of Freddie Mac-owned loans were refinanced in the second quarter of 2005 (USA Today, Lifeline, August 3, 2005), resulting in new mortgages carrying loan amounts at least 5% above the original mortgage balance. Determine if the sample size f..
Why collateral alone does not justify extending credit : Explain why collateral alone does not justify extending credit. Cite examples, using real estate or agricultural products as collateral.
List any strengths and weaknesses in bokka internal : Draw a process map of the conversion processes at Bokka Draw a document flowchart showing the records used in Bokka conversion processes. List any strengths and weaknesses in Bokka internal control procedures. For each weakness, suggest an improvemen..
Periodic inventory system and the lifo inventory cost method : Reuschel uses a periodic inventory system and the LIFO inventory cost method.

Reviews

Write a Review

Finance Basics Questions & Answers

  Write an analysis report of the starbucks company which

write an analysis report of the starbucks company which should discuss the solvency and profitability of this company

  What is the difference in the proceeds to the company net

you need to choose between making a public offering and arranging a private placement. in each case the issue involves

  Calculate amount of cash provided by operating activities

The following are balance sheets for Scott Corporation as of the end of the Years 1 and 2, Calculate the amount of cash provided by Scott's operating activities.

  Explain current dividend, current price and pe ratio

Explain Current dividend, current price and PE ratio of stock and what was the net price change for the date covered by the paper

  Find the penalty griff will pay

Griff's property tax is $670.64 and is due April 10. He does not pay until June 21. The county adds a penalty of 7.5% simple interest on unpaid tax. Find the penalty Griff will pay. (Assume there are 365 days in a year.)

  Computation of present value of an investment

Computation of present value of an investment and present value if you receive these payments at the beginning of each year rather than at the end of each year

  You deposit 500 today in a savings account that pays 35

you deposit 500 today in a savings account that pays 3.5 interest compounded annually. how much will the account be

  What type of risks should the business consider before

a small business is considering investing in high yield dividend stocks. after careful consideration one stock stands

  If your recommendations need to be taken in a particular

1. describe the situation facing mensa at the time of the case. this should include the major issues facing the company

  What will be your rate of return on the investment

An investment offers to pay you $10,000 a year for five years. If it costs $33,520, what will be your rate of return on the investment?

  Dyl pickle inc had credit sales of 3600000 last year and

dyl pickle inc. had credit sales of 3600000 last year and its days sales outstanding was dso 35 days. what was its

  What is the preferred stock after-tax return

A company with a 39% tax rate buys preferred stock in another company. The preferred stock has a before-tax yield of 9%. What is the preferred stock's after-tax return?

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