Calculate the relevant after-tax net cash flows

Assignment Help Managerial Accounting
Reference no: EM132529301

Point 1: Olourun Ltd is the major employer in the Front Hill area, where the firm is located. The company is considering the acquisition of a new production line. The equipment would cost $720 000 and installation cost would amount to $59 000. At the end of its 5-year life, it is expected to be disposed of at its salvage value of $70 000. The new equipment would allow the company to expand production significantly, which would require an increase in working capital of $90 000. If the purchase is made, the firm's maintenance costs would be reduced by $60 000 annually. However, at the end of the third year, a major overhaul would have to be undertaken at a cost of $80 000. Operating cash flows would be $220 000 in the first year; this would increase by 2% for each of the following years.?

Point 2: The company's cost of capital is 14% and the relevant corporate tax rate is 25%

Question a) Calculate the relevant after-tax net cash flows and after-tax profits over the life of the investment.

Reference no: EM132529301

Questions Cloud

Evaluating the risk of a single stock using its beta : 1) In the binomial tree approach to option valuation, one may construct a recombining tree or a non-recombining tree. Give one advantage for each construction.
What are accounting profits : What are her accounting profits? What are her economic profits? Jaynet spends $20,000 per year on painting supplies and storage space.
Calculate the correlation coefficient : Then calculate it? again, letting Row 2 represent the? x-values and Row 1 the? y-values. What effect does switching the variables have on? r?
What is the total cash flow of year for the company : The discount rate (interest rate) for the project is 10% and the company's tax rate is 35%. What is the total cash flow of year 5 for the company
Calculate the relevant after-tax net cash flows : Olourun Ltd is the major employer in the Front Hill area,Calculate the relevant after-tax net cash flows and after-tax profits over the life of the investment.
Qhat is the probability that product will be successfully : a) If a market test result comes back negative, what is the probability that the product will be successfully launched?
Relevant strategic analysis tool : This capstone course requires each student to construct a detailed and well-thought-out analysis of business employing all the relevant strategic analysis tool
Outline the arguments that support proposed plan : Assume that, when run efficiently, each store's maximum daily profits are $40,000. Outline the arguments that support your proposed plan.
Determine standard hours allowed : Determine Standard hours allowed, actual direct labor hours, applied overhead to production.The risk company provides you with the information.

Reviews

Write a Review

Managerial Accounting Questions & Answers

  Explain the three costing methods of job order costing

Explain the three costing methods of job order costing, process costing, and activity-based costing. Compare and contrast the method

  Which of the points support jasmine decision and why

Which of these points support Jasmine's decision to implement an ABC system and which of these points contradict her decision? Why?

  How has technology impacted the verbal and nonverbal cues

Response, analyze how the use of technology has impacted organizational communication both positively and negatively. How has technology impacted the verbal and nonverbal cues used in interpreting messages?

  Cost and revenue variances of processors ltd

Processors Ltd. uses three different products - X, Y and Z to produce its major product line. Each kg of the raw material costs $2.00 for X, $3.75 for Y and $5.20 for Z.

  Compute the revised break-even point in dollars

It will decrease variable costs by $3.50 per unit. Compute the revised break-even point in dollars with the purchase of the new machine.

  Describe how a company you work for

Describing how a company you work for or know in the UAE discharges its corporate social responsibility and ensures that its employees and stakeholders behave ethically and in a socially responsible manner.

  Determine the cost of debt for brandy corporation

$50 million face value bonds that mature in 30 years and have a 6% coupon rate that is paid annually. If the bonds are selling at 102, determine cost of debt.

  Calculate the budgeted volume amount plant used

Calculate the budgeted volume amount (in screen square inches) Plant used in computing the plant wide overhead rate for the year.

  Batco makes metal baseball bats

BatCo makes metal baseball bats. Each bat requires 1 kg. of aluminum at $ 18 per kg. and 0.25 direct labor hours at $ 20 per hour.

  Compute the bill for the job

Compute the bill for the job. Verde estimates that 5,000 labor hours will be worked next year. If Verde repairs a dishwasher that takes 1.5 hours

  Define customer order processing

Customer order processing, where the size of orders varies across customers, is an example of a Organization-sustaining activity.

  Create the budget showing the expected current profit

Speedy Delivery currently delivers packages for $9 each. How do make the budget showing the expected current profit and profit after the changes in costs.

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