What is the annual operating cash flow of the project

Assignment Help Financial Management
Reference no: EM131851664

Bottoms Up Diaper Service is considering the purchase of a new industrial washer. It can purchase the washer for $3,900 and sell its old washer for $1,200. The new washer will last for 6 years and save $1,100 a year in expenses. The opportunity cost of capital is 19%, and the firm’s tax rate is 40%.

a. If the firm uses straight-line depreciation to an assumed salvage value of zero over a 6-year life, what is the annual operating cash flow of the project in years 1 to 6? The new washer will in fact have zero salvage value after 6 years, and the old washer is fully depreciated.

b. What is project NPV? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 2 decimal places.)

c. What is NPV if the firm uses MACRS depreciation with a 5-year tax life? Use the MACRS depreciation schedule. (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Reference no: EM131851664

Questions Cloud

Compute the percentage used up of the ppe : Compute the average useful life. Compute the percentage used up of the PPE.
What is your one year rate of return on this investment : You buy a 13 year, 9% bond when it has a current yield of 8%. What is your 1 year rate of return on this investment?
What is the effective annual rate : Big Dom’s Pawn Shop charges an interest rate of 26.3 percent per month on loans to its customers.What is the effective annual rate?
Why can not you diversify away market or systematic risk : Why can't you diversify away market or systematic risk? What is Tobin's separation property and why is it important?
What is the annual operating cash flow of the project : what is the annual operating cash flow of the project in years 1 to 6?
Best measure of performance of that portfolio : You invest in portfolio and always reinvest any dividends and interest earned. Which of the following provides best measure of performance of that portfolio.
Shopping network may upgrade its modem pool : PC Shopping Network may upgrade its modem pool. What is the net cash flow at time 0 if the old equipment is replaced?
Construct a diversified portfolio from these securities : You have selected four securities for a portfolio, How would you construct a diversified portfolio from these securities?
Calculate the sharpe ratio for each of these funds : What advantages do the mutual funds offer compared to the company stock? Explain. Calculate the Sharpe ratio for each of these funds.

Reviews

Write a Review

Financial Management Questions & Answers

  Find the present worth of the maintenance cost

The maintenance cost of an old truck in a farm is expected to be $1, 000 in year 1. The cost is to increase at the rate of 5% per year. If the truck can be used for 5 years and interest rate is 9% per year, find the present worth of the maintenance c..

  New fixed assets is required to support this growth in sales

Thorpe Mfg., Inc., is currently operating at only 87 percent of fixed asset capacity. Current sales are $410,000. Suppose fixed assets are $350,000 and sales are projected to grow to $479,000. How much in new fixed assets is required to support this ..

  Use for debt when calculating the cost of capital

If the company has a $46.1 million market value of equity, what weight should it use for debt when calculating the cost of capital?

  Imposes penalties on firms that pollute the environment

The Environmental Protection Agency sometimes imposes penalties on firms that pollute the environment.

  Declared a dividend to holders of record

The ABC Co. declared a dividend to holders of record on Friday, October 12, which is payable on Friday, October 26.

  What is your return over the six months

You buy a 20-year bond with a coupon rate of 9.7% that has a yield to maturity of 10.7%. (Assume a face value of $1,000 and semiannual coupon payments.) Six months later, the yield to maturity is 11.7%. What is your return over the 6 months?

  Three nonverbal communication elements

Discuss three verbal communication elements and three nonverbal communication elements

  Americans are addicted to drugs and alcohol

Approximately 14 million Americans are addicted to drugs and alcohol. The federal government estimates that these addicts cost the U.S. economy $300 billion in medical expenses and lost productivity. What is the net present value of the project?

  Cash flow is expected to grow at a constant rate

A 35-year maturity financial security is expected to have a cash flow of $230 one year form today. The cash flow is expected to grow at a constant rate of 12% per year for its life. The required rate of return on asset is 14%. What is the maximum pri..

  What is the current dividend and what is the dividend yield

Using the Wall Street Journal or online sources, look up the following stocks: General Electric, Ford Motors, Microsoft, and Intel, and answer the following questions for each stock. Use the most current information available. What is the current pri..

  How can we break down the valuation of a deferred annuity

Which has the highest present value if the payments and number of payments are identical, an ordinary annuity or an annuity due?

  What is company unlevered cost of equity capital

Weston Industries has a debt–equity ratio of 1.2. Its WACC is 9 percent, What is the company’s unlevered cost of equity capital?

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