Develop the cash flow after tax

Assignment Help Financial Management
Reference no: EM132037013

A company invests in an equipment that costs $300k with $40k salvage value and will be depreciated over 8 years according to the DDB method. The equipment could generate revenues of $25k in the first year and increase by 5000$ every year thereafter. The operating and maintenance costs of the equipment are 1200$ in the first year and increase by 10% each year thereafter. The tax rate of the company Income is 32%.

A. Develop the cash flow before tax (CFBT)

B. Apply the RoR Analysis on the CFBT to check if this project is worthy for the company. Assuming that the MARR of the company is 25%.

C. Develop the cash flow after tax (CFAT)

D. Apply the RoR Analysis on the CFAT to check if this project is worthy for the company. Assuming that the MARR of the company is 25%.

E. Compare and justify the answers of B and D.

Reference no: EM132037013

Questions Cloud

Required yield to maturity on comparable-risk bond : The annual coupon interest rate is 15 percent and the market's required yield to maturity on a comparable-risk bond is 16 percent.
Calculate the implied volatility of the underlying stock : Calculate the implied volatility of the underlying stock. Calculate the volatility of the call option.
What is the market value of the firm after the recap : Assuming the Irrelevance Proposition holds, what is the market value of the firm after the recap? What is the market value of equity?
What will market value of bonds be if they are noncallable : What will the market value of these bonds be if they are noncallable?
Develop the cash flow after tax : Develop the cash flow before tax (CFBT). Develop the cash flow after tax (CFAT)
What is its yield to maturity : A 7-year, 11.00% semiannual coupon bond with a par value of $1000 may be called in 5 years at a call price of $1,255.00. What is it’s yield to maturity?
What is the fair price of this investment : If the discount rate is 9.10% compounding quarterly, what is the fair price of this investment?
A firm enterprise and equity values will increase : A firm’s enterprise and equity values will increase in response to all of the following variables assuming other things are equal except for
Shares must you buy to be assured of earning seat on board : How many more shares must you buy to be assured of earning a seat on the board?

Reviews

Write a Review

Financial Management Questions & Answers

  What should be the delta to create a riskless portfolio

If the investor writes a call option with a strike price of $43, what should be the delta to create a riskless portfolio?

  Repaid in equal monthly payments

XYZ Company borrows $60,000 today to be repaid in equal monthly payments over 4 years. The loan has an annual interest rate of 6%. SHOW all TVM buttons used on the TI BAII Plus Calculator.  What is the monthly payment? What is the total interest paid..

  Investment management

Saint and Lewis Investment Management (SLIM) Inc. is considering purchasing bonds to be issued by Caterpilar Inc. The bonds have a face value of $10,000 and a coupon rate of 6%. The bonds will mature 10 years after they are issued. The issue price is..

  Even though most corporate bonds

Even though most corporate bonds in the United States make coupon payments semiannually, what is the current price of the bond?

  Using free cash flows expected to be generated by firm

Using dividends expected to be paid to shareholders yield the same valuation for the firm as using free cash flows expected to be generated by the firm?

  Explain the reinvestment rate and terminal wealth analysis

So what type of bond might you invest in if you were concerned that inflation was going to go up? Investors have been worrying about this for years now.

  How much should you invest today to achieve your objective

How much should you invest today to achieve your objective?

  Expects some returns through capital gains and dividends

After that period he expects some returns through capital gains and dividends.

  What are some of the operating exposures

what are some of the operating exposures you would recommend that management consider? Explain your reasoning.

  Modigliani miller proposition on capital structure

State the Modigliani Miller Proposition I (MM I) on Capital Structure. Explain the proposition using your own words.

  What else can impact bond price

While different bond features impact bond prices, what else can impact a bond's price? Would each investor be willing to pay the exact same price

  Assuming effective annual interest at rate

Payments of 200 due July 1, 2012 and 300 due July 1, 2014 have the same value on July 1, 2009 as a payment of 100 made on July 1, 2009 along with a payment made on July 1, 2013. Find the payment needed July 1, 2013 assuming effective annual interest ..

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