Explain the concept of incremental cash flow analysis

Assignment Help Corporate Finance
Reference no: EM13200657

QUESTION 1

Jarum Industrial Tools is considering a 3-year project to improve its production efficiency. Buying a new machine press for RM611,000 is estimated to result in RM193,000 in annual pretax cost savings. The press falls in the MACRS five-year class (Table 1), and it will have a salvage value at the end of the project of RM162,000. The press also requires an initial investment in spare parts inventory of RM19,000, along with an additional RM2,000 in inventory for each succeeding year of the project. If the tax rate is 35 percent and the discount rate is 12 percent, should the company buy and install the machine press? Why or why not?Table 1: Modified ACRS depreciation allowances

427_Explain the concept of incremental cash flow analysis.png

QUESTION 2

a) Explain the concept of incremental cash flow analysis and its purpose.

b) Explain the difference between a sunk cost and an opportunity cost and give an example of each.

QUESTION 3

Chong Motors just issued 225,000 zero coupon bonds. These bonds mature in 20 years, have a par value of RM1, 000, and have a yield to maturity of 7.45 percent. What is the approximate total amount of money the company raised from issuing these bonds? (Assume semi-annual compounding)

Reference no: EM13200657

Questions Cloud

State the shape of the cable that supports the roadway : What is the shape of the cable that supports the roadway of a suspension bridge? Our model is based on the following simplifying instructions
How would adjustments affect the slope of aggregate supply : In the short run, prices may rise faster than costs. This chapter discusses why this might happen. Suppose that labor and management agree to adjust wages continuously for any changes in the price level.
How much will he have to invest today to reach goal : Jim Smith believes in 30 years he will need $80,000 to buy a retirement cottage. Assuming he gets an interest rate of 9% compounded annually, how much will he have to invest today to reach his retirement goal?
Explaining behavior is easy-when we lack something : Your psychology professor tells you, "Explaining behavior is easy! When we lack something, we are motivated to get it." Which approach to motivation does your professor subscribe to?
Explain the concept of incremental cash flow analysis : Explain the concept of incremental cash flow analysis and its purpose and explain the difference between a sunk cost and an opportunity cost and give an example of each.
The type of the wireless internet service : Wireless high speed internet is provided for free in the airport of the city of communityville. At first, only a few people use the service. What type a good is this and why.
Where is the economy operating relative to potential gdp : What is the relationship between potential output and the natural rate of unemployment If the economy currently has a frictional unemployment rate of 2 percent, structural unemployment of 2 percent, seasonal unemployment of 0.5 percent
Childern learning to play percussion instrument : Define how you might contribute a lesson given to a group of 7 year old childern learning to play percussion instrument.
Role of servant to their constituents : In the role of servant to their constituents, members of congress:

Reviews

Write a Review

Corporate Finance Questions & Answers

  Sole proprietorship, partnership, and corporation forms

Discuss the primary differences between partnership, sole proprietorship, and corporation forms of business ownership?

  Would it be acceptable for a company to account

On July 1, Pine Region Dairy leased equipment from Farm America for a period of three years. The lease calls for monthly payments of $2,500 payable in advance on the first day of each month, beginning July 1.

  Hedging the price risk

You have a commitment to supply 10,000 oz of gold to customer in 3 months time at some specified value and are planning hedging the value risk that you face.

  Which project should the company accept

Project A Project BInitial Outlay $100,000 $150,000Useful Life 5 years 5 years Net Present Value 130,000 $140,000If the required rate of return is 12% which project should the company accept?

  Calculate the balance of its investment in nye account

Assume that Jong used the equity method of accounting for its investment in Nye instead of the cost method. Calculate the balance of its "Investment in Nye" account.

  Net present value and internal rate of return

Net Present Value, and internal Rate of Return, should Sally undertake this project - Annual fixed costs are projected at $140,000 per year and variable costs are projected at 50% of sales.

  Analysts at tabby fur storage predict

Analysts at Tabby Fur Storage predict that the net present value of a proposed new $10 million warehouse is $1 million. How should these findings be interpreted - the project should be rejected because the NPV is less than the cost of the warehouse..

  Make journal entry to record reacquisition of the stock

On June 15, Bunting Company reacquired 12,000 shares of its dollar 10 par value common stock for $18 per share. Bunting uses cost method to account for treasury stock.

  What is your net new financing needed for next year

Your non-debt liabilities such as accounts payable are forecasted to increase by $10,000. What is your net new financing needed for next year?

  Find the best ways to diversify a portfolio

Discuss the benefits and limitations of portfolio diversification and explain how risk is assessed and what methods are most appropriate for measuring systematic & unsystematic risks.

  What is your available balance

How long do you have to pay before the account is overdue?  If you take the full period, how much should you remit and calculate cash collections in each year of the four quarters

  Average collection period to the industry average

How much additional financing can be obtained from receivables if Anderson institutes more stringent credit and collection policies and is able to reduce its average collection period to the industry average and calculate the firm's current, quick,..

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