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Incremental operating cash inflows
A firm is considering renewing its equipment to meet increased demand for its product. The cost of equipment modifications is $1.95 million plus $108,000 in installation costs. The firm will depreciate the equipment modifications under? MACRS, using a? 5-year recovery period. Additional sales revenue from the renewal should amount to $1.19 million per? year, and additional operating expenses and other costs? (excluding depreciation and? interest) will amount to 45% of the additional sales. The firm is subject to a tax rate of 40%. (Note?: Answer the following questions for each of the next 6? years.)
a. What incremental earnings before? depreciation, interest, and taxes will result from the? renewal?
b. What incremental net operating profits after taxes will result from the? renewal?
c. What incremental operating cash inflows will result from the? renewal?
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What is the proper cash flow amount to use as the initial investment in fixed assets when evaluating this project?
"Leveraged buyouts follow a simple model - the PE firm acquires a listed firm, delists it, loads it up with debt and sell it off to the market. Given that the equity contribution is so low - there is virtually no risk to the private equity firm." Com..
Kellogg Co. (K) recently earned a profit of $2.52 earnings per share and has a P/E ratio of 19.50. The dividend has been growing at a 9 percent rate over the past few years. If this growth rate continues, what would be the stock price in five years i..
Write down the relationship between nominal rates of return (rnominal), real rates of return (rreal), and the inflation rate (π).
You have just made your first $3,000 contribution to your retirement account. Assuming you earn an 9 percent rate of return and make no additional contributions. What will your account be worth when you retire in 45 years?
What is the value of a 6-month European call option with a strike price of $51?
You have been asked by the firm to evaluate the acquisition of a special-purpose machine.
Keller Cosmetics maintains an operating profit margin of 8.20% and a sales-to-assets ratio of 3.30. It has assets of $540,000 and equity of $340,000. Interest payments are $34,000 and the tax rate is 35%. What is the return on assets? What is the ret..
Blake Company has 3400 hourly workers. They work 40 hours a week, at the rate of $7.00 an hour, and they are paid every Friday. The company has decided to pay them twice a month. The cost of printing and processing each check is $1.25. The cost of ca..
Filer Manufacturing has 9 million shares of common stock outstanding. The current share price is $75, and the book value per share is $6. Filer manufacturing also has two bond issues outstanding. What are Filer's capital structure weights on a book v..
what incremental free cash flows should be included to account for the need to accelerate the purchase of the tank? cars?
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