$482.16
$496.38
$505.69
$519.05
$524.72
Points Received:4 of 4
2.Question:
Tapley Dental Associates is considering a project that has the following cash flow data. What is the project\'s payback?
Year: 0 1 2 3 4 5
Cash flows: $1,000 $300 $310 $320 $330 $340
2.11 years 



2.50 years 



2.71 years 



3.05 years 



3.21 years 


Points Received:4 of 4
3.Question:
Ryngaert Medical Enterprises is considering a project that has the following cash flow and WACC data. What is the project\'s NPV? Note that a project\'s projected NPV can be negative, in which case it will be rejected.
WACC = 10%
Year: 0 1 2 3 4
Cash flows: $1,000 $400 $405 $410 $415
$241.24 



$255.83 



$268.54 



$274.78 



$289.84 


Points Received:4 of 4
4.Question:
Rockmont Recreation Inc. is considering a project that has the following cash flow data. What is the project\'s IRR? Note that a project\'s projected IRR can be less than the WACC (and even negative), in which case it will be rejected.
Year: 0 1 2 3 4
Cash flows: $1,000 $250 $230 $210 $190
5.15% 


3.44% 



1.17% 



2.25% 



3.72% 


Points Received:4 of 4
5.Question:
A company is analyzing two mutually exclusive projects, S and L, with the following cash flows:
0 1 2 3 4
Project S $1,000 $900 $250 $10 $10
Project L $1,000 $0 $250 $$400 $800
The company\'s WACC is 10 percent. What is the IRR of the better project? (Hint: Note that the better project may or may not be the one with the higher IRR.)
Points Received:4 of 4
6.Question:
You must evaluate a proposal to buy a new milling machine. The base price is $108,000, and shipping and installation costs would add another $12,500. The machine falls into the MACRS 3year class, and it would be sold after 3 years for $65,000. The applicable depreciation rates are 33, 45, 15 and 7 percent as discussed in Appendix 12A of your text book. The machine would require a $5,500 increase in working capital (increased inventory less increased accounts payable). There would be no effect on revenues, but pretax labor costs would decline by $44,000 per year. The marginal tax rate is 35 percent, and the WACC is 12 percent. Also, the firm spent $5,000 last year investigating the feasibility of using the machine.
How should the $5,000 spent last year be handled?
Points Received:4 of 4
7.Question:
You must evaluate a proposal to buy a new milling machine. The base price is $108,000, and shipping and installation costs would add another $12,500. The machine falls into the MACRS 3year class, and it would be sold after 3 years for $65,000. The applicable depreciation rates are 33, 45, 15 and 7 percent as discussed in Appendix 12A of your text book. The machine would require a $5,500 increase in working capital (increased inventory less increased accounts payable). There would be no effect on revenues, but pretax labor costs would decline by $44,000 per year. The marginal tax rate is 35 percent, and the WACC is 12 percent. Also, the firm spent $5,000 last year investigating the feasibility of using the machine.
What is the net cost of the machine for capital budgeting purposes, that is, the Year 0 project cash flow?
Points Received:4 of 4
8.Question:
You must evaluate a proposal to buy a new milling machine. The base price is $108,000, and shipping and installation costs would add another $12,500. The machine falls into the MACRS 3year class, and it would be sold after 3 years for $65,000. The applicable depreciation rates are 33, 45, 15 and 7 percent as discussed in Appendix 12A of your text book. The machine would require a $5,500 increase in working capital (increased inventory less increased accounts payable). There would be no effect on revenues, but pretax labor costs would decline by $44,000 per year. The marginal tax rate is 35 percent, and the WACC is 12 percent. Also, the firm spent $5,000 last year investigating the feasibility of using the machine.
What are the net operating cash flows during Years 1, 2 and 3?
Points Received:4 of 4
9.Question:
You must evaluate a proposal to buy a new milling machine. The base price is $108,000, and shipping and installation costs would add another $12,500. The machine falls into the MACRS 3year class, and it would be sold after 3 years for $65,000. The applicable depreciation rates are 33, 45, 15 and 7 percent as discussed in Appendix 12A of your text book. The machine would require a $5,500 increase in working capital (increased inventory less increased accounts payable). There would be no effect on revenues, but pretax labor costs would decline by $44,000 per year. The marginal tax rate is 35 percent, and the WACC is 12 percent. Also, the firm spent $5,000 last year investigating the feasibility of using the machine.
What is the terminal year cash flow?
Points Received:4 of 4
10.Question:
You must evaluate a proposal to buy a new milling machine. The base price is $108,000, and shipping and installation costs would add another $12,500. The machine falls into the MACRS 3year class, and it would be sold after 3 years for $65,000. The applicable depreciation rates are 33, 45, 15 and 7 percent as discussed in Appendix 12A of your text book. The machine would require a $5,500 increase in working capital (increased inventory less increased accounts payable). There would be no effect on revenues, but pretax labor costs would decline by $44,000 per year. The marginal tax rate is 35 percent, and the WACC is 12 percent. Also, the firm spent $5,000 last year investigating the feasibility of using the machine.
Should the machine be purchased? Explain your answer.
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Final
unit 8
all solutions with steps
Points Received:4 of 4
1.Question:
1. Blanchford Enterprises is considering a project that has the following cash flow and WACC data. What is the project\'s NPV? Note that a project\'s projected NPV can be negative, in which case it will be rejected.
WACC = 10%
Year: 0 1 2 3 4
Cash flows: $1,000 $475 $475 $475 $475
$482.16
$496.38
$505.69
$519.05
$524.72
Points Received:4 of 4
2.Question:
Tapley Dental Associates is considering a project that has the following cash flow data. What is the project\'s payback?
Year: 0 1 2 3 4 5
Cash flows: $1,000 $300 $310 $320 $330 $340
2.11 years
2.50 years
2.71 years
3.05 years
3.21 years
Points Received:4 of 4
3.Question:
Ryngaert Medical Enterprises is considering a project that has the following cash flow and WACC data. What is the project\'s NPV? Note that a project\'s projected NPV can be negative, in which case it will be rejected.
WACC = 10%
Year: 0 1 2 3 4
Cash flows: $1,000 $400 $405 $410 $415
$241.24
$255.83
$268.54
$274.78
$289.84
Points Received:4 of 4
4.Question:
Rockmont Recreation Inc. is considering a project that has the following cash flow data. What is the project\'s IRR? Note that a project\'s projected IRR can be less than the WACC (and even negative), in which case it will be rejected.
Year: 0 1 2 3 4
Cash flows: $1,000 $250 $230 $210 $190
5.15%
3.44%
1.17%
2.25%
3.72%
Points Received:4 of 4
5.Question:
A company is analyzing two mutually exclusive projects, S and L, with the following cash flows:
0 1 2 3 4
Project S $1,000 $900 $250 $10 $10
Project L $1,000 $0 $250 $$400 $800
The company\'s WACC is 10 percent. What is the IRR of the better project? (Hint: Note that the better project may or may not be the one with the higher IRR.)
Points Received:4 of 4
6.Question:
You must evaluate a proposal to buy a new milling machine. The base price is $108,000, and shipping and installation costs would add another $12,500. The machine falls into the MACRS 3year class, and it would be sold after 3 years for $65,000. The applicable depreciation rates are 33, 45, 15 and 7 percent as discussed in Appendix 12A of your text book. The machine would require a $5,500 increase in working capital (increased inventory less increased accounts payable). There would be no effect on revenues, but pretax labor costs would decline by $44,000 per year. The marginal tax rate is 35 percent, and the WACC is 12 percent. Also, the firm spent $5,000 last year investigating the feasibility of using the machine.
How should the $5,000 spent last year be handled?
Points Received:4 of 4
7.Question:
You must evaluate a proposal to buy a new milling machine. The base price is $108,000, and shipping and installation costs would add another $12,500. The machine falls into the MACRS 3year class, and it would be sold after 3 years for $65,000. The applicable depreciation rates are 33, 45, 15 and 7 percent as discussed in Appendix 12A of your text book. The machine would require a $5,500 increase in working capital (increased inventory less increased accounts payable). There would be no effect on revenues, but pretax labor costs would decline by $44,000 per year. The marginal tax rate is 35 percent, and the WACC is 12 percent. Also, the firm spent $5,000 last year investigating the feasibility of using the machine.
What is the net cost of the machine for capital budgeting purposes, that is, the Year 0 project cash flow?
Points Received:4 of 4
8.Question:
You must evaluate a proposal to buy a new milling machine. The base price is $108,000, and shipping and installation costs would add another $12,500. The machine falls into the MACRS 3year class, and it would be sold after 3 years for $65,000. The applicable depreciation rates are 33, 45, 15 and 7 percent as discussed in Appendix 12A of your text book. The machine would require a $5,500 increase in working capital (increased inventory less increased accounts payable). There would be no effect on revenues, but pretax labor costs would decline by $44,000 per year. The marginal tax rate is 35 percent, and the WACC is 12 percent. Also, the firm spent $5,000 last year investigating the feasibility of using the machine.
What are the net operating cash flows during Years 1, 2 and 3?
Points Received:4 of 4
9.Question:
You must evaluate a proposal to buy a new milling machine. The base price is $108,000, and shipping and installation costs would add another $12,500. The machine falls into the MACRS 3year class, and it would be sold after 3 years for $65,000. The applicable depreciation rates are 33, 45, 15 and 7 percent as discussed in Appendix 12A of your text book. The machine would require a $5,500 increase in working capital (increased inventory less increased accounts payable). There would be no effect on revenues, but pretax labor costs would decline by $44,000 per year. The marginal tax rate is 35 percent, and the WACC is 12 percent. Also, the firm spent $5,000 last year investigating the feasibility of using the machine.
What is the terminal year cash flow?
Points Received:4 of 4
10.Question:
You must evaluate a proposal to buy a new milling machine. The base price is $108,000, and shipping and installation costs would add another $12,500. The machine falls into the MACRS 3year class, and it would be sold after 3 years for $65,000. The applicable depreciation rates are 33, 45, 15 and 7 percent as discussed in Appendix 12A of your text book. The machine would require a $5,500 increase in working capital (increased inventory less increased accounts payable). There would be no effect on revenues, but pretax labor costs would decline by $44,000 per year. The marginal tax rate is 35 percent, and the WACC is 12 percent. Also, the firm spent $5,000 last year investigating the feasibility of using the machine.
Should the machine be purchased? Explain your answer.