Reference no: EM131339626
Project cash flow and NPV. The managers of Classic Autos Incorporated plan to manufacture classic Thunderbirds (1957 replicas). The necessary foundry equipment will cost a total of $4,300,000 and will be depreciated using a five-year MACRS life, Projected sales in annual units for the next five years are 310 per year. If the sales price is $28,000 per car, variable costs are $16,000 per car, and fixed costs are $1,100,000 annually, what is the annual operating cash flow if the tax rate is 40%? The equipment is sold for salvage for $525,000 at the end of year five. What is the after-tax cash flow of the salvage? Net working capital increases by $550,000 at the beginning of the project? (year 0) and is reduced back to its original level in the final year. What is the incremental cash flow of the project? Using a discount rate of 13% for the project, determine whether the project should be accepted or rejected according to the NPV decision model.
What is the annual operating cash flow of project in year 1?_____________ Round to nearest dollar
What is the annual operating cash flow of this project in year 2? _____________ Round to nearest dollar
What is the annual operating cash flow of this project in year 3? _____________ Round to nearest dollar
What is the annual operating cash flow of this project in year 4? _____________ Round to nearest dollar
What is the annual operating cash flow of this project in year 5? _____________ Round to nearest dollar
What is the book value of the equipment after five? years? _____________ Round to nearest dollar
What is the gain (or loss) for the sales of the equipment after 5 years? _____________ Round to nearest dollar
What is the? after-tax cash flow of the equipment at disposal? _____________ Round to nearest dollar
What is the NPV of the project? _____________ Round to nearest dollar
What is the incremental cash flow of the project in year 0?____________
What is the incremental cash flow of the project in year 1?____________
What is the incremental cash flow of the project in year 2?____________
What is the incremental cash flow of the project in year 3?_____________
What is the incremental cash flow of the project in year 4?____________
What is the incremental cash flow of the project in year 5?_____________
What is the NPV of the project?______________
|
Estimate of the company cost of equity
: Stock in Daenerys Industries has a beta of 1.2. The market risk premium is 9 percent, and T-bills are currently yielding 4.6 percent. The company’s most recent dividend was $1.80 per share, and dividends are expected to grow at an annual rate of 8 pe..
|
|
When an investment is not performing well
: When an investment is not performing well, our dissatisfaction falls sharply and quickly. Investment gains do not please us as much as investment losses concern us. Explain Why?
|
|
What are arithmetic and geometric returns for the stock
: A stock has had returns of −19.2 percent, 29.2 percent, 26.4 percent, −10.3 percent, 35 percent, and 27.2 percent over the last six years. What are the arithmetic and geometric returns for the stock?
|
|
Discuss the tools we can use to assess project-level risk
: Discuss the tools we can use to assess project-level risk and how we can use this information in our capital budgeting activities. Calculate the after-tax cost of debt Interest rate of 10%; tax rate of 35%. Round your answer to two decimal places.
|
|
What is the after-tax cash flow of equipment at disposal
: Project cash flow and NPV. The managers of Classic Autos Incorporated plan to manufacture classic Thunderbirds (1957 replicas). The necessary foundry equipment will cost a total of $4,300,000 and will be depreciated using a five-year MACRS life, Proj..
|
|
What is the standard deviation for this stock
: Over the past five years a stock produced annual returns of 11%, 16%, 5%, 2%, and 9%, respectively. Based on this information, what is the standard deviation for this stock?
|
|
What is your percentage return on investment for the year
: You purchased 200 shares of preferred stock on January 1, 2002 for $42.27 per share. The stock pays an annual dividend of $5 per share. On December 31, 2002 the market price is $43.88 per share. What is your percentage return on investment for the ye..
|
|
What is the real rate of return on this investment
: An investor purchased a stock for $1.61 per share, held it for one year, and sold it for $3.03 a share. The stock did not pay a dividend. Inflation for that year was 3.2% and Treasury bills returned 3.7%. What is the real rate of return on this inves..
|
|
Ethical professional practice-confidentiality standard
: The IMA Statement of Ethical Professional Practice includes a confidentiality standard that requires members to “keep information confidential except when disclosure is authorized or legally required.” Do you think there are any circumstances when yo..
|