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Your firm is contemplating the purchase of a new $575,000 computer-based order entry system. The system will be depreciated straight-line to zero over its five-year life. It will be worth $59,000 at the end of that time. You will save $265,000 before taxes per year in order processing costs, and you will be able to reduce working capital by $74,000 (this is a one-time reduction). If the tax rate is 34 percent, what is the IRR for this project?
Determine the IRR on the following projects: Initial outlay of $35,000 with an after-tax cash flow at the end of the year of $5,836 for seven years. Initial outlay of $350,000 with an after-tax cash flow at the end of the year of $70,000 for seven ye..
JJ Enterprises is considering the purchase of a new machine that will produce thumb drives. The new machine will require an initial investment of $100,000 and has an economic life of five years and will be fully depreciated by the straight line metho..
Using the equations and tables in Appendix 12A of this chapter, determine the answers to each of the following independent situations: The future value in two years of $2,000 deposited today in a savings account with interest compounded annually at 6..
An investment offers $6,100 per year for 15 years, with the first payment occurring one year from now. If the required return is 6 percent, what is the value of the investment? What would the value be if the payments occurred for 40 years? For 75 yea..
The Chester Company has just purchased $40,900,000 of plant and equipment that has an estimated useful life of 15 years. The expected salvage value at the end of 15 years is $4,090,000. What will the book value of this purchase (exclude all other pla..
A new project you are considering is expected to generate an operating cash flow of $45,620 and will initially free up $22,000 in net working capital. Purchases of fixed assets costing $68,800 will be required to start up the project. What is the tot..
The firm’s global competitiveness is mainly dependent on:
Which of the following statements about opportunity costs is incorrect?
The AB300 Company is identical to the BA720 Company (information in previous problem) in every respect save two: it is debt free and its cost of equity is 11.5%. What is the value of the AB300 Company?
The Green Wheel Inc., a company that produces alternative energy vehicles is considering an expansion of their product line to Taiwan. The expansion would require a purchase of equipment with a price of $4,500,000 and additional installation of $500,..
Scanlin, Inc., is considering a project that will result in initial aftertax cash savings of $1.87 million at the end of the first year, and these savings will grow at a rate of 1 percent per year indefinitely. What is the maximum initial cost the co..
Which of the following can cause a project to have multiple IRRs?
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