Reference no: EM133023948

Questions -

Based on the following information, what is the relevant operating cash flow (OCF) associated with the project expected to be in year 3? The project would require an initial investment in equipment of $170,000 that would be depreciated using MACRS where the depreciation rates in years 1, 2, 3, and 4 are 43%, 34%, 18%, and 5%, respectively. At the end of the project in 3 years, the equipment would be sold for an expected after-tax cash flow of $9,800. In year 3 of the project, relevant revenue associated with the project would be $167,000 and relevant costs associated with the project would be $124,000. The tax rate is 40 percent.

GlivCo is evaluating project A, which would require the purchase of a piece of equipment for $170,000. During year 1, project A is expected to have relevant revenue of $109,000, relevant costs of $53,000, and some depreciation. GlivCo would need to borrow $170,000 for the equipment and would need to make an interest payment of $10,000 to the bank in year 1. Relevant net income for project A in year 1 is expected to be $19,000 and operating cash flows for project A in year 1 are expected to be $41,000. Straight-line depreciation would be used. What is the tax rate expected to be in year 1?

What is the NPV of the zippered-glove project? The project would require an initial investment in equipment of $752,000 and would last for either 3 years or 4 years (the date when the project ends will not be known until it happens and that will be when the equipment stops working in either 3 years from today or 4 years from today). The first annual operating cash flow of $137,000 is expected in 1 year, and annual operating cash flows of $137,000 per year are expected each year until the project ends in either 3 years or 4 years. In 1 year, the project is expected to have an after-tax terminal value of $816,000. The cost of capital for this project is 19.16 percent.

If the expected return on the market is 8.67 percent, the inflation rate is 2.63 percent, the risk-free rate is 3.82 percent, and GlivCo common stock has a beta of 0.71, then what is the expected return for GlivCo stock?

The expected return on the market is 9.87 percent, the inflation rate is 4.02 percent, and the risk-free return is 4.99 percent. GlivCo stock is currently priced at $89.11 per share and is expected to pay its next annual dividend in 1 year. GlivCo's next dividend is expected to be $4.56 per share and the stock is expected to be priced at $93.72 in 1 year. What is GlivCo's beta?