Caspian Sea Drinks is considering the production of a diet drink. The expansion of the plant and the purchase of the equipment necessary to produce the diet drink will cost $26.00 million. The plant and equipment will be depreciated over 10 years to a book value of $1.00 million, and sold for that amount in year 10. Net working capital will increase by $1.41 million at the beginning of the project and will be recovered at the end. The new diet drink will produce revenues of $9.01 million per year and cost $2.35 million per year over the 10-year life of the project. Marketing estimates 10.00% of the buyers of the diet drink will be people who will switch from the regular drink. The marginal tax rate is 30.00%. The WACC is 14.00%. Find the IRR (internal rate of return).

Fossa Road Paving Corporation is considering an investment in a curb-forming machine. The machine will cost $240,000, will last 10 years, and will have a $40,000 salvage value at the end of 10 years. The machine is expected to generate net cash inflows of $60,000 per year in each of the 10 years. Fossa's discount rate is 18%. The net present value of the proposed investment is closest to (Ignore income taxes.): Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using the tables provided. Multiple Choice $69,640 $37,280 $(48,780) $5,840

Firm Z has invested $4 million in marketing campaign to assess the demand for the product Minish. This product will be in the market next year and will last five years. Revenues are projected to be  $50 million per year along with expenses of $20 million. The firm spends $15 million immediately on equipment that will be depreciated using MACRS depreciation to zero.​ Additionally, it will use some fully depreciated existing equipment that has a market value of $4 million. Finally, Minish will have no incremental cash or inventory requirements (products will be shipped directly from the contract manufacturer to customers).  But, receivables are expected to account for 15% of annual sales. Payables are expected to be 15% of the annual cost of goods sold (COGS) between year 1 and year 4. All accounts payables and receivables will be settled at the end of year 5. Based on this information and WACC in the first part of the question, find the NPV of the project. Identify the IRR of the…

RealTurf is considering purchasing an automatic sprinkler system for its sod farm by borrowing the entire $30,000 purchase price. The loan would be repaid with four equal annual payments at an interest rate of 12%/year. It is anticipated that the sprinkler system would be used for 9 years and then sold for a salvage value of $2,000. Annual operating and maintenance expenses for the system over the 9-year life are estimated to be $9,000 per year. If the new system is purchased, cost savings of $15,000 per year will be realized over the present manual watering system. RealTurf uses a MARR of 15%/year for economic decision making. Based on a present worth analysis, is the purchase of the new sprinkler system economically attractive?

Mountain Sounds Corp. is evaluating a cost savings project. The project's expected operational life is seven years. The project will save the firm $248,730 in net working capital, a one time savings for the life of the project. The project will require an investment in capital equipment of $5,631,945 and has an expected after-tax salvage value of $888,328. After considering the cash savings and depreciation impact the firm expects the project to generate operating cash flows of $1,034,805 each year for the life of the project. What is the NPV of the project if the firm's WACC is 8.9%?

A firm is considering an investment in a new machine with a price of $17.6 million to replace its existing machine. The current machine has a book value of $7.3 million and a market value of $6 million. The new machine is expected to have a 4-year life, and the old machine has four years left in which it can be used. If the firm replaces the old machine with the new machine, it expects to save $7.25 million in operating costs each year over the next four years. Both machines will have no salvage value in four years. If the firm purchases the new machine, it will also need an investment of $440,000 in net working capital. The required return on the investment is 11 percent and the tax rate is 24 percent. The company uses straight-line depreciation. What is the NPV of the decision to purchase a new machine? (Do not round intermediate calculations and enter your answer in dollars, not millions, rounded to 2 decimal places, e.g., 1,234,567.89.) What is the IRR of the decision to purchase a…

Lakeside Winery is considering expanding its winemaking operations. The expansion will require new equipment costing $697,000 that would be depreciated on a straight-line basis to zero over the 5-year life of the project. The equipment will have a market value of $192,000 at the end of the project. The project requires $62,000 initially for net working capital, which will be recovered at the end of the project. The operating cash flow will be $187,600 a year. What is the net present value of this project if the relevant discount rate is 14 percent and the tax rate is 21 percent? Multiple Choice -$19,132 -$3,975 -$16,142 -$22,893 -$21,257

GeoSourcex is considering opening a new titanium mine. Once in operation, the mine is expected to produce positive net cash flows in perpetuity starting 3 years from now at $19.5 million per year but declining at a constant rate of 1.8% per year. The costs of getting the mine operational include an immediate payment of $110.0 million to purchase the land and acquire the mineral rights, plus other start -up costs of $10.0 million per year for three years starting in one year. If the project's cost of capital is 10.2% per year (compounded annually) what is the Net Present Value of this new mine?

Rearden Metals is considering opening a strip mining operation to provide some of the raw materials needed in producing Rearden metal. The initial purchase of the land and the associated costs of opening up mining operations will cost $100 million today. The mine is expected to generate $16 million worth of ore per year for the next 12 years. At the end of the 12th year Rearden will need to spend $20 million to restore the land to its original pristine nature appearance. The number of potential IRRs that exist for Rearden's mining operation is equal to: O A. 2 OB. 1 O C. 12 O D. 0 C

This alternative involves purchasing new aquaculture equipment for $500,000, with a forecasted useful life of 10 years, to replace old equipment that could be disposed of at an estimated salvage value of $60,000. If GBEI acquires the new equipment, it could take on a bigger service area that was not previously feasible, thus leading to an annual increase in sales of $200,000. With the improvements in technology built into the equipment, GBEI’s annual operating expenses would be reduced by $100,000. Operation of the new equipment would require GBEI to maintain inventory levels $100,000 higher than usual over the life of the project. The new equipment could be sold at the end of its useful life for $40,000. Assume straight line depreciation. Assume gross margin on incremental revenues is 60%. The cost of capital for this investment is 11.65%. 1. Calculate the NPV, Payback Period, and Profitability Index of the purchase of the new aquaculture equipment.