Calculate the operating cash flows

Assignment Help Finance Basics
Reference no: EM133120477

Windsor Co. is evaluating the proposed acquisition of a new machine, which can be used for 5 years. This machine is in asset class 9, which has a CCA rate of 30%. The machine's base price is $650,000. For simplicity, we assume that no additional working capital is required during the machine's economic life. The firm's production department anticipates the machine will generate an additional $450,000 per year in annual operating revenue, while the associated annual operating expenses are projected to be $325,000 per year. Management estimates that at the end of 5 years, the machine can be sold for $120,000. Assume the asset class remains open after the machine is sold, and the firm's cost of capital is 12%. The firm's tax rate is 45%.

Calculate the operating cash flows each year from year 1 to year 5.

Calculate the total free cash flows at each date associated with this investment.

Calculate the NPV of this investment.

If the asset class is closed after the machine is sold at the end of 5 years, how will your answer in part 2) change? Why?

Reference no: EM133120477

Questions Cloud

What are the standard deviations of returns on stock : Consider the following possible rates of returns on stock A, stock B, and stock C over the next year: What are the standard deviations of returns on stock A, st
How big of a building can you build : How big of a building can you build? Blank 1 (round to the nearest square foot) What is the interest expense per square foot in this budget? Blank 2 (do not inc
Calculate the operating cash flows : Windsor Co. is evaluating the proposed acquisition of a new machine, which can be used for 5 years. This machine is in asset class 9, which has a CCA rate of 30
Calculate the npv of investment : Windsor Co. is evaluating the proposed acquisition of a new machine, which can be used for 5 years. This machine is in asset class 9, which has a CCA rate of 30
Calculate the operating cash flows : Windsor Co. is evaluating the proposed acquisition of a new machine, which can be used for 5 years. This machine is in asset class 9, which has a CCA rate of 30
Case study-rhodes corporation : Rhodes Corporation: Income Statements for Year Ending December 31 (Millions of Dollars)
Apply critical thinking and judgement : How did Colonisation impact Indigenous Australians - Apply critical thinking and judgement in identifying appropriate help and supports suitable for Kirra's
Calculate the interest rate : As an investor, you expect the inflation rate to be 7% next year, to fall to 5% during the following year and then to remain at a rate of 3% thereafter.
Explain the dominance of american banks : 1. Suppose you own shares in a company. The current price per share is $25. Another company has just announced that it wants to buy your company and will pay $3

Reviews

Write a Review

Finance Basics Questions & Answers

  Compute the value of hansen dividend stream

1. Hanson PLC (LSE:HNS) is selling for GBP472. Hansen has a beta of 0.83 against FTSE 100 index, and the current dividend is GBP 14.50. The risk-free rate of re

  Explain control employee stress resulting from the change

Explain Control employee stress resulting from the change. Communicate details about the change. Present a 3- to 4-page paper in a Microsoft Word document formatted in APA style.

  A 1000 bond is issued at par the market price of the common

a 1000 bond is issued at par. the market price of the common stock at the issue date was 20. the conversion price is

  Compute the average return differential

Compute the average return differential with and without sign. Do not round intermediate calculations. Round your answers to two decimal places.

  Explain the concept of market failure

With relevant examples briefly explain the concept of Market failure. four (4) When markets fail, the government often intervenes by regulating an industry.

  Statement of research question

Need to formulate a couple of causal hypothesis/es from a theoretical orientation for the following Statement of research question:

  Compute the price of security

You have just bought a security which pays $500 every six months. The security lasts for 10-years. Another security of equal risk also has a maturity of 10-years, and pays 10% compounded monthly.

  Project internal rate of return

If the project's Internal Rate of Return is 8.4percent, what is the amount of the single cash flow at the end of four years?

  Drawbacks to market-based carbon strategies

Drawbacks to market-based carbon strategies include all of the following except:

  Residual distribution policy with all distributions

If net income next year is $3 million and Puckett follows a residual distribution policy with all distributions as dividends, what will be its dividend payout?

  Financial mangers make decisions today that will affect

financial mangers make decisions today that will affect the firm in the future.nbsp the dollars used for investment

  What is the coupon rate

The market price of a semi-annual pay bond is $980.42. It has 30.00 years to maturity and a yield to maturity of 7.38%. What is the coupon rate?

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