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(Calculating project cash flows and? NPV) The Guo Chemical Corporation is considering the purchase of a chemical analysis machine. The purchase of this machine will result in an increase in earnings before interest and taxes of ?$90000 per year. The machine has a purchase price of ?$400000 and it would cost an additional ?$7000 after tax to install this machine correctly. In? addition, to operate this machine? properly, inventory must be increased by ?$20000.This machine has an expected life of 10 ?years, after which time it will have no salvage value. ? Also, assume simplified? straight-line depreciation, that this machine is being depreciated down to? zero, a 38 percent marginal tax? rate, and a required rate of return of 11 percent.
a. What is the initial outlay associated with this? project?
b. What are the annual? after-tax cash flows associated with this project for years 1 through 9??
c. What is the terminal cash flow in year 10 ?(that is, the annual? after-tax cash flow in year 10 plus any additional cash flow associated with termination of the? project)?
d. Should this machine be? purchased?
If the expected level of EBIT is $100 million with a standard deviation of $20 million, what is the probability of having unfavorable financial leverage if the debt financing alternative is chosen?
Hadley Inc. forecasts the year-end free cash flows (in millions) shown below. FCF yr1 -$22.32 yr2 $37.9 yr3 $43.8 yr4 $52.4 yr5 $55.2 The weighted average cost of capital is 9%, and the FCFs are expected to continue growing at a 5% rate after Year 5...
Grunewald Industries sells on terms of 3/10, net 50. Gross sales last year were $4,319,000, and accounts receivable averaged $404,500. Half of Grunewald's customers paid on the 10th day and took discounts. What are the nominal and effective costs of ..
Cavo Corporation expects an EBIT of $26,550 every year forever. The company currently has no debt, and its cost of equity is 14 percent. The corporate tax rate is 35 percent. A What is the current value of the company? What will the value of the firm..
Mr. Johnson will receive $6,500 a year for the next 14 years from his trust. If an 8 percent interest rate is appropriate: What is the current value of the future payments? Determine the amount of money in a savings account at the end of five years, ..
You read in The Wall Street Journal that 30-day T-bills are currently yielding 5.9%. Your brother-in-law, a broker at Safe and Sound Securities, has given you the following estimates of current interest rate premiums: On the basis of these data, what..
GDebi Enterprises is thinking of building a chemical processing plant to produce 4-hydroxy-3-methoxybenzaldehyde. The firm estimates that the initial cost of the project will be $14.8 million, and the plant will produce cash inflows of $6.5 million f..
Calculate the net funds available to the parent MNC? if. Foreign taxes can be applied as a credit against the? MNC's U.S. tax liability.
Consider the following 2012 data for newark general hospital (in millions of dollars) simple budget flexible budget actual results. calculate and interpret the two profit variances. calculate and interpret the two revenue variances. calculate and int..
New Homes has a bond issue with a coupon rate of 5.5 percent that matures in 8.5 years. The bonds have a par value of $1,000 and a market price of $972. Interest is paid semiannually. What is the yield to maturity?
Attached table shows all activities to finish a project. The crashing cost is in thousand dollar. Activity Immediate Predecessor Normal Time (weeks) Crashing Cost (1st week) Crashing Cost (2nd week) A - 6 8 - B A 4 5 6 C A 4 - - D B 5 6 6 E C 6 5 6 F..
Manitoba Oil Corp. (MOC) is a small petroleum exploration and development company operating in the southwest corner of the province. It has three million common shares outstanding, and perpetual debt with a market value of $30 million. Calculate the ..
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