2. Corporation VB was formed in 2023. Immediately prior to year-end, VB is considering a $500,000deductible expenditure. It can either make the expenditure before the end of 2023, or wait until 2024.However, if it waits, the cost of the expenditure will increase to $525,000. Before considering thisexpenditure, VB has the following projected pretax cash flows and taxable income for 2023, 2024, and2025:Taxable income andpretax cash flow202320242025$120,000$400,000$700.000a. Using a 5 percent discount rate, compute the NPV of VB's after-tax cash flows if the expenditure isin 2023.b. Using a 5 percent discount rate, compute the NPV of VB's after-tax cash flows if the expenditure isin 2024.e. Based on your calculations, when should VB make this expenditure?

The net present value is the technique used in capital budgeting to calculate the current value of a…

Answered: 2. Corporation VB was formed in 2023.…

Financial Management: Theory & Practice

16th Edition

ISBN:9781337909730

Author:Brigham

Publisher:Brigham

Chapter2: Financial Statements, Cash Flow,and Taxes

Section: Chapter Questions

Problem 18P: Rhodes Corporations financial statements are shown after part f. Suppose the federal-plus-state tax...

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Use the relevant information contained in the Cash Flow and Income Statement Tabs. Compute the Net Free Cash Flow to Invested Capital for the year 2022. State as a whole number and round to the second decimal place. (i.e. $12,987.654 would be written as 12,987.65). Assume the appropriate tax rate to compute NOPAT is 27%.
A company anticipates a taxable cash expense of $80,000 in year 2 of a project. The company's tax rate is 30% and its discount rate is 10%. The present value of this future cash flow is closest to: Select one: a. $(56,000) b. $(19,835) c. $(46,281) d. $(24,000)
Sunshine Corporation is reviewing an investment proposal. The initial cost of the investment is R52 500. The estimated cash flows and net profit for each year are presented in the schedule below. All cash flows are assumed to take place at the end of the year. Year Net cash flows Net profit1 R20 000 R2 5002 R17 500 R3 5003 R15 000 R4 5004 R12 500 R5 5005 R10 000 R6 500 The cost of capital is 12%.Required:Calculate the following:1. Payback Period 2. Net Present value 3. Accounting rate of return
Two models R1 = 4.87 + 0.55t + 0.01t2 and R2 = 4.87 + 0.61t + 0.07t2 are given for revenue (in millions of dollars) for a corporation. Both models are estimates of revenues from 2020 through 2025, with t = 0 corresponding to 2020. Which model projects the greater revenue? How much more total revenue does that model project over the six-year period?
Rhodes Corporations financial statements are shown after part f. Suppose the federal-plus-state tax corporate tax is 25%. Answer the following questions. a. What is the net operating profit after taxes (NOPAT) for 2020? b. What are the amounts of net operating working capital for both years? c. What are the amounts of total net operating capital for both years? d. What is the free cash flow for 2020? e. What is the ROIC for 2020? f. How much of the FCF did Rhodes use for each of the following purposes: after-tax interest, net debt repayments, dividends, net stock repurchases, and net purchases of short-term investments? (Hint: Remember that a net use can be negative.) Rhodes Corporation: Income Statements for Year Ending December 31 (Millions of Dollars) Rhodes Corporation: Balance Sheets as of December 31 (Millions of Dollars)
Based upon the information below, what is the value of the company as of 1/1/2021 (use the APV model). 2018 FCF $6,000,000 2019 FCF $6,600,000 2020 FCF $6,800.000 2021 FCF $5,500,000 2022 FCF $5,800,000 2023 FCF $6,000,000 2024 FCF $6,700,000 2018 Tax Shield $250,000 2019 Tax Shield $270,000 2020 Tax Shield $280,000 2021 Tax Shield $290,000 2022 Tax Shield $310,000 2023 Tax Shield $320,000 2024 Tax Shield $340,000 Terminal growth rate: 1.5% Discount rate: 8% 100,157,709 95,609,163 101,594,609 80,184,086
What is the depreciation for the year 2022? What is the revaluation surplus on December 31, 2022? What amount of income from grant is recognized for the year 2021?
Fordson has the following financial information for FY 2023 (in thousands): Operating revenue Salary expense Depreciation expense All other operating expenses Tax expense (20% tax rate) Net Income Expected working capital increase of Capital expenditure What is free cash flow? O 420 720 820 O 1120 O Cannot be calculated 4000 1000 400 1200 280 1120 300 400
Cash Flow From AssetsIf your corporation's operating cash flow for 2020 is $7,300, net capital spending is $3,500, and your change in net working capital is $1,600, what is your 2020 cash flow from assets? Please show your formula and calculations in the space provided.
A corporation makes an investment of $20,000 that will provide the following cash flows after the corresponding amounts of time:Year 1 - $10,000Year 2 - $10,000Year 3 - $2,000Should the company make this investment? What is the net present value at a 7 percent discount rate?
Murdoch Pty Ltd is considering threemutually exclusive projects. The initial cashoutflow and after-tax cash inflowsassociated with each project are show inthe following table:Cash FlowsProjectX ($)ProjectY ($)ProjectZ ($)Initial CashOutflowCash InflowsYears 1-550,000100.000115,00027.00041,00043.000 A) Calculate the payback period for each period B) Calculate the NPV of each project assuming,that the company has a cost of capital equal to13% C) Calculate IRR for each project. D) Summarise the preferences dictated by eachmeasure, and indicate which project you wouldrecommend. Explain why. 2. Whale Wash Limited issued eleven-year bondsone year ago at a coupon rate of 7.5%. Thebonds have a face value of $150.000 and makesemi-annual payments. It the YTM on the bondsis 8.6% p.al, what is the current bond price? 3. Why does the value of a share depend on adividend? 4. Perth Limited has just paid an annual dividendper share of $0.75. The firm expects thatdividends will grow at a rate of 8%…
if the Accumulated depreciation in a company was 80,000 in 2019 and then increased to reach 132,000 in 2020. Then we would report the depreciation expense in the cash flow statement:- Select one: a. 52000 b. (52000) c. 132000 d. 80000

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