Exercise A-16 (Static) Present Value of Cash Flows Grove Media plans to acquire production equipment for $800,000 that will be depreciated for tax purposes as follows: year 1, $320,000; year 2, $180,000; and in each of years 3 through 5, $100,000 per year. A 10 percent discount rate is appropriate for this asset, and the company's tax rate is 20 percent. Use Exhibit A.8 and Exhibit A.9. Required: a. Compute the present value of the tax shield resulting from depreciation. b. Compute the present value of the tax shield from depreciation assuming straight-line depreciation ($160,000 per year). Complete this question by entering your answers in the tabs below. Required A Required B Compute the present value of the tax shield resulting from depreciation. Note: Round PV factor to 3 decimal places. Present value of the tax shield $ 129,039 X < Required A Required B >

Philadelphia Fastener Corporation manufactures nails, screws, bolts, and other fasteners. Management is considering a proposal to acquire new material-handling equipment. The new equipment has the same capacity as the current equipment but will provide operating efficiencies in labor and power usage. The savings in operating costs are estimated at $140,000 annually. The new equipment will cost $400,000 and will be purchased at the beginning of the year when the project is started. The equipment dealer is certain that the equipment will be operational during the second quarter of the year it is installed. Therefore, 60 percent of the estimated annual savings can be obtained in the first year. The company will incur a one-time expense of $40,000 to transfer production activities from the old equipment to the new equipment. No loss of sales will occur, however, because the processing facility is large enough to install the new equipment without interfering with the operations of the…

After-tax cash flows: Year 1 2 3 4 Project Alpha R 37 000 72 400 246 000 Project Omega R 72 000 72 000 72 000 72 000 Both projects require an initial investment of R235 400 and the cost of capital is 12%. As the project manager of Delta Construction Ltd. you are required to: 1.2.1 Calculate the Net Present Valub (NPV) for both projects. 1.2.2 Recommend, with reasons which project should be chosen

Company Express S. A. asks you to construct cash flows for following three (3) investment projects, containing following information:PROJECT 1a. Sales (in ThCh$):- Year 1: 90,000- Year 2: 55,000- Year 3: 75,000- Year 4: 190,000b. Cost of sales is estimated at 53% of sales.c. Depreciation for year is ThCh$ 15,000 per period (period 1 to 3). In year 4 there is a sale of machinery that results in a gain on sale of non-current assets of ThCh$ 9,800. Total depreciation for year 4 is ThCh$ 12,500.d. Administrative expenses are equivalent to 17% of sales.e. In period 0 there is an investment of ThCh$ 58,000.f. There is credit financing of ThCh$ 32,000 which is amortized in equal parts of ThCh$ 8,000 per period with a financial expense of ThCh$ 3,700 per period.g. There is an investment in working capital of ThCh$ 24,000 in period 0, which is recovered in period 4.h. In period 4 there is an investment in land of ThCh$ 40,000.i. Income tax rate is 17%. Calculate: cash flow per period. Please…

What is the net after tax cash flow for year 4 if the applicable tax rate is 40%? a. $39,328b. $68,321c. $20,327d. $47,331 What is the net present worth of the project's after-tax cash flows at 12%? a. $0b. $36,410c. $24,966d. $112,339 If the company were able to sell the asset for $60,000 in year 5 instead of $50,000, what would be the new after-tax cash flow for year 5?a. $88,553b. $31,663c. $92,553d. The answer cannot be determined from the information given.

Question three For each of the following projects compute (i) pay-back period, (ii) post payback profitability and (iii) post-back profitability index Initial outlay             50,000,000   Annual cash inflow (after tax but before depreciation)  Shs .10,000,000        Estimated life                                                           8 Years Initial outlay 50,000,000   Annual cash inflow (after tax but before depreciation)       First three years   Shs .15,000,000      Next five years     Shs.  5,000,000 Estimated  life               8 Years Salvage  Shs.  8,000,000

ccounting ART B: SHOW YOUR CALCULATIONS. INTELEK Corporation is in the process of expansion its business operation. Provided below is the after-tax cash flows for both projects. Cost of capital will be 10%. Year Project A (RM) Project B (RM) 0 50,000 47,000 1 15,000 20,000 2 15,000 (10,000) 3 15,000 15,000 4 15,000 14,000 5 15,000 20,000   For each project, calculate: a) Payback Period and Net Present Value b) Suggest which project should the company invest , why?   APPENDIX – TABLE TIME VALUE OF MONEY @ 10% Year PVIF (10%) PVIFA (10%) 1 0.9091 0.9091 2 0.8264 1.7355 3 0.7513 2.4869 4 0.6830 3.1699 5 0.6209 3.7908

Question 3: Juhayna Food Industries is attempting to select the best of three mutually exclusive projects. The initial investment and after-tax cash inflows associated with these projects are shown in the following table. Cash flow Project A Project B Project C Initial Investment 100000 120,000 130,000 Year 1 Cash Inflows  30000 36,500 38000 Year 2 cash inflows 35000 45000 20000 Year 3 cash inflows 40000 40000 42000 Year 4 cash inflows 38000 35000 45000 Year 5 cash inflows 20000 30000 50000   Taking into consideration that the cost of debt 7% , cost of preferred stock 12% and cost of new common stock 15%. The weight of each source of capital are long term debt 30% , preferred stock 20% and common stock equity 50%.   TO dO Create a spreadsheet to answer the following questions: Calculate the firm‘s cost of capital ( WACC) Calculate the payback period for each project. Calculate the net present value (NPV) of each…

Question 3: Juhayna Food Industries is attempting to select the best of three mutually exclusive projects. The initial investment and after-tax cash inflows associated with these projects are shown in the following table. Cash flow Project A Project B Project C Initial Investment 100000 120,000 130,000 Year 1 Cash Inflows  30000 36,500 38000 Year 2 cash inflows 35000 45000 20000 Year 3 cash inflows 40000 40000 42000 Year 4 cash inflows 38000 35000 45000 Year 5 cash inflows 20000 30000 50000   Taking into consideration that the cost of debt 7% , cost of preferred stock 12% and cost of new common stock 15%. The weight of each source of capital are long term debt 30% , preferred stock 20% and common stock equity 50%. Calculate the internal rate of return (IRR) for each project. Discuss any conflict in ranking that may exist between NPV and IRR. Summarize the preferences dictated by each measure, and indicate which…

Answer all the questions QUESTION 1 Questions a. After-tax cash flows for two mutually exclusive projects (with economic lives of four years each) are: Y Year Project X Project K(12,000) 5,000 01234 5,000 5,000 5,000 i. ii. iii. K(12,000) 0 0 0 25,000 The company's cost of capital is 10 percent. Compute the following: The internal rate of return for each project. The net present value for each project. Which project should be selected? Why? b. A firm is considering the purchase of an automatic machine for K6,200. The machine has an installation cost of K800 and zero salvage value at the end of its expected life of five years. Depreciation is by the straight-line method with the half-year convention. The machine is considered a five-year property. Expected cash savings before tax is K1,800 per year over the five years. The firm is in the 40 percent tax bracket. The firm has determined the cost of capital (or minimum required rate of return) as 10 percent after taxes. Should the firm…