Elmdale Enterprises is deciding whether to expand its production facilities. Although long-term cash flows are difficult to estimate, management has projected the following cash flows for the fir years (in millions of dollars): (Click on the following icon in order to copy its contents into a spreadsheet.) Revenues COGS and Operating expenses other than depreciation Depreciation Increase in net working capital Capital expenditures Marginal corporate tax rate Year 1 121.2 49.3 24.7 5.3 30.7 a. What are the incremental earnings for this project for years 1 and 2? b. What are the free cash flows for this project for the first two years? 35% a. What are the incremental earnings for this project for years 1 and 2? The incremental earnings for year 1 is $ million. (Round to one decimal place.) Year 2 159.8 57.3 32.8 8.9 38.4 35% (...)

Elmdale Enterprises is deciding whether to expand its production facilities. Although long-term cash flows are difficult to estimate, management has projected the following cash flows for the fir years (in millions of dollars): (Click on the following icon in order to copy its contents into a spreadsheet.) Revenues COGS and Operating expenses other than depreciation Depreciation Increase in net working capital Capital expenditures Marginal corporate tax rate Year 1 121.2 49.3 24.7 5.3 30.7 a. What are the incremental earnings for this project for years 1 and 2? b. What are the free cash flows for this project for the first two years? 35% a. What are the incremental earnings for this project for years 1 and 2? The incremental earnings for year 1 is $ million. (Round to one decimal place.) Year 2 159.8 57.3 32.8 8.9 38.4 35% (...)

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Elmdale Enterprises is deciding whether to expand its production facilities. Although long-term cash flows are difficult to estimate, management has projected the following cash flows for the first two years (in millions of dollars): (Click on the following icon in order to copy its contents into a spreadsheet.) Revenues COGS and Operating expenses other than depreciation Depreciation Increase in net working capital Capital expenditures Marginal corporate tax rate Year 1 101.2 48.1 22.7 3.1 31.6 a. What are the incremental earnings for this project for years 1 and 2? b. What are the free cash flows for this project for the first two years? 35% Year 2 160.1 38.1 35.2 7.8 40.6 35%
Elmdale Enterprises is deciding whether to expand its production facilities. Although long-term cash flows are difficult to estimate, management has projected the following cash flows for the first two years (in millions of dollars): (Click on the following icon in order to copy its contents into a spreadsheet.) Revenues COGS and Operating expenses other than depreciation Depreciation Increase in net working capital Capital expenditures Marginal corporate tax rate Year 1 103.7 43.3 a. What are the incremental earnings for this project for years 1 and 2? b. What are the free cash flows for this project for the first two years? a. What are the incremental earnings for this project for years 1 and 2? The incremental earnings for year 1 is $ 26.1 3.9 30.4 25% million. (Round to one decimal place.) The incremental earnings for year 2 is $ b. What are the free cash flows for this project for the first two years? The free cash flow for year 1 is $ The free cash flow for year 2 is $ million.…
Etobicoke Enterprises is deciding whether to expand its production facilities. Although long-term cash flows are difficult to estimate, management has projected the following cash flows for the first two years (in milions of dollars) Revenues Operating Expenses (other than depreciation) CCA Increase in Net Working Capital Capital Expenditures Marginal Corporate Tax Rate S Year 1 S 121.2 47.6 21.2 S 3.3 30.3 35% Year 2 a What are the incremental earnings for this project for years 1 and 27 (Note: Assume any incremental cost of goods sold is included as part of operating expenses.) b. What are the tree cash flows for this project for the first two years? O a Calculate the incremental earings for Year 1 of this project below. (Round to one decimal place.) Incremental Earnings Forecast (millions) Year 1 Sales Operating Expenses CCA EBIT Income tax at 35% Unlevered Net Income 152.7 56.2 42.9 8.1 36.6
La Falaise Rouge Enterprises is deciding whether to expand its production facilities. Although long-term cash flows are difficult to estimate, management has projected the following cash flows for the first two years (in millions of dollars). Calculate the unlevered net income for Year 2. Revenues Costs of goods sold and operating expenses other than depreciation Depreciation Increase in networking capital Capital expenditures Marginal corporate tax rate Year 1 108 -36.6 -24.2 5.1 32.1 43% Year 2 156 -36.6 -38.6 8.9 42.5 43%
Etobicoke Enterprises is deciding whether to expand its production facilities. Although long-term cash flows are difficult to estimate, management has projected the following cash flows for the first two years (in millions of dollars): Revenues Operating Expenses (other than depreciation) CCA Increase in Net Working Capital Capital Expenditures Marginal Corporate Tax Rate Year 1 128.5 47.2 29.9 3.1 28.7 35% Year 2 155.5 63.7 34.1 8.9 41.6 35% a. What are the incremental earnings for this project for years 1 and 2? (Note: Assume any incremental cost of goods sold is included as part of operating expenses.) b. What are the free cash flows for this project for the first two years?
Etobicoke Enterprises is deciding whether to expand its production facilities. Although long-term cash flows are difficult to estimate, management has projected the following cash flows for the first two years (in millions of dollars): Year 2 Revenues Operating Expenses (other than depreciation) CCA Increase in Net Working Capital Capital Expenditures Marginal Corporate Tax Rate Sales Operating Expenses CCA EBIT Income tax at 35% Unlevered Net Income $ a. What are the incremental earnings for this project for years 1 and 2? (Note: Assume any incremental cost of goods sold is included as part of operating expenses.) b. What are the free cash flows for this project for the first two years? $ Year 1 a. Calculate the incremental earnings for Year 1 of this project below: (Round to one decimal place.) Incremental Earnings Forecast (millions) $ 122.7 33.4 22.7 3.6 30.3 35% Year 1 166.6 52.1 43.2 8.5 41.7 35% O C
In your first job with TBL Inc. your task is to consider a new project whose data are shown below. What is the project's Year 1 cash flow? The annual operating cash flows of the project can be calculated as follows: OCF = {[Sales - Operating Costs]*(1-Tax Rate)} + (Depreciation * Tax Rate) Sales revenues $225,250 Depreciation $78,847 Other operating costs $92,000 Tax rate 18%
Rocky Mountains Enterprises is deciding whether to expand its production facilities. Although long-term cash flows are difficult to estimate, management has projected the following cash flows for the first two years (in millions of dollars): Year 1 Year 2 Revenues 130.0 175.0 Cost of goods sold and operating expenses other than depreciation 37.0 55.0 Depreciation 28.0 33.0 Increase in net working capital 4.5 7.5 Capital expenditures 32.0 44.0 Interest expenditures Marginal corporate tax rate 35% 35% a. What are the incremental earnings for this project for years 1 and 2? b. What are the free cash flows to the firm for this project for the first two years?
As assistant to the CFO of Boulder Inc., you must estimate the Year 1 cash flow for a project with the following data. What is the Year 1 cash flow? Sales revenues $13,000 Depreciation $4,000 Otheroperatingcosts $6,000 Tax rate 35.0%
Dogwood Company is considering a capital investment in machinery: (Click the icon to view the data.) 8. Calculate the payback. 9. Calculate the ARR. Round the percentage to two decimal places. 10. Based on your answers to the above questions, should Dogwood invest in the machinery? 8. Calculate the payback. Amount invested Expected annual net cash inflow Payback 1,500,000 24 500,000 3 years 9. Calculate the ARR. Round the percentage to two decimal places. Average annual operating income Average amount invested ARR Data Table Initial investment $ 1,500,000 Residual value 350,000 Expected annual net cash inflows 500,000 Expected useful life 4 years Required rate of return 15%
Mario Kat, Inc plans a new project. Calculate its IRR. Assume that its initial after tax cost is $5,000,000 and it is expected to provide after-tax operating cash flows of ($1,800,000) in year 1, $2,900,000 in year 2, $2,700,000 in year 3 and $2,300,000 in year 4?
As assistant to the CFO of Boulder Inc., you must estimate the Year 1 cash flow for a project with the following data. What is the Year 1 cash flow? Do not round the intermediate calculations and round the final answer to the nearest whole number. Sales revenues $13,100 Depreciation $4,000 Other operating costs $6,000 Tax rate 35.0%

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