Munir S/B has provided the following data concerning a proposed investment project: Initial investment.................. $861,000 Annual net cash receipts...... $271,000 Life of the project................. 5 years Salvage value...................... $129,000 The company's tax rate is 30%. For tax purposes, the straight line method will be used and capital allowances (CA)s will be claimed only over 3 years over the entire initial cost without any reduction for salvage value. The company uses a discount rate of 11%. Required: (ii)Calculate the taxable cash flows for years 1-3

Munir S/B has provided the following data concerning a proposed investment project: Initial investment.................. $861,000 Annual net cash receipts...... $271,000 Life of the project................. 5 years Salvage value...................... $129,000 The company's tax rate is 30%. For tax purposes, the straight line method will be used and capital allowances (CA)s will be claimed only over 3 years over the entire initial cost without any reduction for salvage value. The company uses a discount rate of 11%. Required: (ii)Calculate the taxable cash flows for years 1-3

EBK CFIN

6th Edition

ISBN:9781337671743

Author:BESLEY

Publisher:BESLEY

Chapter11: The Cost Of Capital

Section: Chapter Questions

Problem 19PROB

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Question 16 Munir S/B has provided the following data concerning a proposed investment project:             Initial investment.................. $861,000 Annual net cash receipts...... $271,000 Life of the project................. 5 years Salvage value...................... $129,000 The company's tax rate is 30%. For tax purposes, the straight line method will be used and capital allowances (CA)s will be claimed only over 3 years over the entire initial cost without any reduction for salvage value. The company uses a discount rate of 11%. Required: (v) What is the tax incurred on the salvage value in year 5?
Question 17 Munir S/B has provided the following data concerning a proposed investment project:             Initial investment.................. $861,000 Annual net cash receipts...... $271,000 Life of the project................. 5 years Salvage value...................... $129,000 The company's tax rate is 30%. For tax purposes, the straight line method will be used and capital allowances (CA)s will be claimed only over 3 years over the entire initial cost without any reduction for salvage value. The company uses a discount rate of 11%. Required: (vi) What is the NPV of the project?
Munir S/B has provided the following data concerning a proposed investment project:             Initial investment.................. $861,000 Annual net cash receipts...... $271,000 Life of the project................. 5 years Salvage value...................... $129,000 The company's tax rate is 30%. For tax purposes, the straight line method will be used and capital allowances (CA)s will be claimed only over 3 years over the entire initial cost without any reduction for salvage value. The company uses a discount rate of 11%. Required: (i)Calculate the annual CAs for years 1-3
Initial investment............... $80,000 Annual after-tax cash inflow............. ? Salvage value........................ $0 Net present value................ $13,600 Life of the project................ 7 years Discount rate........................ 12% Based on the data given above, the annual cash inflow from the project after the initial investment is closest to... (assume the after-tax cash flows are the same each year) Select one: a. $23,747 b. $32,894 c. $36,428 d. $22,766 e. $20,509
Question 10 (Ignore income taxes in this problem.) Z Company has gathered the following data on a proposed investment project: Investment in equipment.................................. $150,000 Annual cash flows........................................... $40,000 Salvage value of equipment............................. $0 Life of the equipment....................................... 10 years Required rate of return.................................... 10% The company uses straight-line depreciation on all equipment. Required: (iii) Calculate the ARR
Question 11 (Ignore income taxes in this problem.) Z Company has gathered the following data on a proposed investment project: Investment in equipment.................................. $150,000 Annual cash flows........................................... $40,000 Salvage value of equipment............................. $0 Life of the equipment....................................... 10 years Required rate of return.................................... 10% The company uses straight-line depreciation on all equipment. Required: (iv) Is this a viable project?
Question 8 (Ignore income taxes in this problem.) Z Company has gathered the following data on a proposed investment project: Investment in equipment.................................. $150,000 Annual cash flows........................................... $40,000 Salvage value of equipment............................. $0 Life of the equipment....................................... 10 years Required rate of return.................................... 10% The company uses straight-line depreciation on all equipment. Required:(i) Calculate he payback period
Best Industries is considering an investment project that has the following cash flows:Year 0…………… $ -1,200Year 1………………. 200Year 2……………….. 200Year 3……………….. 800Year 4………………… 300The company’s discount rate for such calculations is 10% 1. For Best Industries what is the project’s IRR?a. 10.00%b. 11.92%c. 22.75%d. 8.40% 2. For Best Industries what is the NPV?a. $153b. $ -46.94c. $375.44d. $ -153.06 3. Internal rate of return is also:a. Yieldb. Rate of return c. Discount rate that makes the NPV equal to zerod. All of the above
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11:52 Investment Appraisal (Year 2 Column 2... 35% 4. An investment has the following cash flows. What is the ARR? Year 0 -90,000 Year 1 45,000 10,000 Year 2 Year 3 30,000 30,000 Year 4 6% 7% 9% 5. Which of the following investments would you choose based on payback? Project 3 years 6 months 5 years 10 months A В ... Activity Chat Teams Assignments More
11:52 Investment Appraisal (Year 2 Column 2... 2 years 8 months 3. An investment has the following cash flows. What is the ARR? Year 0 -120,000 Year 1 30,000 Year 2 40,000 60,000 Year 3 Year 4 90,000 90,000 Year 5 38% 36% 32% 35% 4. An investment has the following cash flows. What is the ARR? Year 0 -90,000 Year 1 45,000 ... Activity Chat Teams Assignments More 10
The management of Revco Products is exploring four different investment opportunities. Information onthe four projects under study follows:Project Number1 2 3 4Investment required ....................... $(270,000) $(450,000) $(360,000) $(480,000)Present value of cashinfl ows at a 10%discount rate .............................. 336,140 522,970 433,400 567,270Net present value .......................... $ 66,140 $ 72,970 $ 73,400 $ 87,270Life of the project ........................... 6 years 3 years 12 years 6 yearsInternal rate of return ..................... 18% 19% 14% 16%The company’s required rate of return is 10%; thus, a 10% discount rate has been used in the present valuecomputations above. Limited funds are available for investment, so the company can’t accept all of theavailable projects.Required:1. Compute the project profitability index for each investment project.2. Rank the four projects according to preference, in terms of:a. Net present valueb. Project profitability…

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bartleby, a Learneo, Inc. business

	Initial investment..................	$861,000
	Annual net cash receipts......	$271,000
	Life of the project.................	5 years
	Salvage value......................	$129,000