Reference no: EM133077009

Questions -

Q1) Coquitlam Construction Inc. has recently bought an asset costing $525,000. The asset assumes a useful of 4-year, $90,000 salvage value, and is depreciated on a straight-line method. It is reported that the company posted net income of $15,000, $18,500, $20,000, and $21,000 over the last four years. Calculate the company's average accounting return over the past four years based on the information given above.

Q2) Project Alpha and Beta have 4 year timelines. Project Alpha has an initial investment of $100,000 and cash inflows of $60,000, $50,000, $40,000 and $40,000. Project Beta has an initial investment of $75,000 and cash inflows of $50,000, $40,000, $30,000 and $30,000. Calculate the IRR of the differential cash-flows between the two projects at which the company will be indifferent.

Q3) Gamma project has a useful life of 4 year with an initial cost of $1,000,000. The expected cash inflows for the next four years are $600,000, $500,000, $400,000, and $400,000, respectively. Compute the discounted payback period for the gamma project assuming the rate of return at 12%.

Q4) Amazon luxury Inc. is evaluating the following two mutually exclusive projects. The company estimates that the required rate of return is 10.75 percent for project A and 12 percent for project B. Which project should the company accept and why?

Q5) Telus Brewery Inc. is purchasing a new asset of $225,000 and is expected to have useful life for five years with no salvage value. The company will use a 30% CCA rate as per the appropriate classification of the asset. The new asset will save $90,000 annually before taxes. Using the tax shield approach, calculate the NPV of the purchase. The company's required rate of return is 11%, with a tax rate of 30%.