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$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 3-year 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 pre-tax 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 3-year 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 pre-tax 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 3-year 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 pre-tax 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 3-year 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 pre-tax 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 3-year 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 pre-tax 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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  14507

Final unit 8 all solutions with steps Points Received:4 of 4 1.Question: 1. Blanchford Enterprises is considering a project that has the follow...

Question:

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 3-year 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 pre-tax 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 3-year 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 pre-tax 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 3-year 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 pre-tax 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 3-year 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 pre-tax 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 3-year 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 pre-tax 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.

 

 

ATTACHMENTS
unit_8.docx