Celtic Inc. is considering a 16-year project that will generate before tax cash flow of $18,000 per year for 16 years. The project requires a machine that costs $96,000. The CCA rate is 20% and the salvage value is $9,600. Celtic has cash of $66,000 and needs to borrow the balance at 6% interest rate to purchase the machine. Celtic is required to repay $10,000 at year 4 and the remaining balance at year 16. The corporate tax rate is 30%. If the weighted average cost of capital is 11% and the machine is the only asset in the asset class, calculate the NPV of the project using the WACC approach.

Your company is about to undertake a major investment project. The project will require an initial investment of $200 million in a machine plus another $35 million for working capital. Tax authorities will allow you to depreciate the machine on a straight-line basis over four years to a salvage value of zero. In fact, however, you expect that you can sell the machine for $30 million at the end of Year 4. You will need to have a working capital balance on hand at the end of each year equal to 30% of that year’s sales. The working capital can be fully recovered at the end of the project’s life. You expect that the project will generate $100 million in sales and $40 million in cash operating expenses (excluding depreciation) during each of the next four years. The corporate tax rate is 40%.  The discount rate is 7.25%.    What is NPV of this project?

Paulita's Products Inc. is considering the new piece of equipment that costs P75,000.  The equipment is expected to generate revenues before-tax cash inflows of P25,000 per year for five year.  The equipment would be depreciated using straight-line method over its five-year useful life.  Upon retirement, the machine is expected to have a market value of P8,000.  The company considers the maximum impact of income taxes in all of its capital investment decisions.  The company has a 35 percent income tax rate and desires an after-tax return of 12 percent on its investment.  The present value of 1, end of 5 years at 12% is 0.56743 and for ordinary annuity is 3.60478.  The net present value of the equipment is: c.  P 21,248 b.  P 4,539 a.  P 7,042 d.  P 5,453

Tanner Corporation is considering the acquisition of a new machine that is expected to produce annual savings in cash operating costs of $70,000 before income taxes. The machine costs $244,000, has a useful life of five years, and no salvage value. Tanner uses straight-line depreciation on all assets, is subject to a 30% income tax rate, and has an after-tax hurdle rate of 8 %. FV of $1 at FV of an ordinary annuity at PV of $1 at PV of an ordinary annuity at Yr .8% 8% 8% 8% 1 1.080 1.000 0.926 0.926 2 1.166 2.080 0.857 1.783 3 1.260 3.246 0.794 2.577 4 1.360 4.506 0.735 3.312 5 1.469 5.867 0.681 3.993 6 1.587 7.336 0.630 4.623 Required: If the machine's accounting rate of return on the initial investment is 6%. Compute the machine's net present value

Acompany is evaluating the addition of equipment to its presentoperations. They need to purchase equipment for $160,000. The five year MACRS GDS Recovery Method is appropriate forthe investment and the total tax rate (federal plus state) is 40%. Gross revenue is expected to be $30,000/year while maintenance costs are expected to be $5,000/year. It is expected that the operation will be shut down at the end of the fourth year with a salvage value of $20,000.1-Prepare a table showing your development of the ATCF's.

Fitzgerald Computers is considering a new project whose data are shown below. The required equipment has a 3-year tax life, after which it will have zero book value, and it will be depreciated by the straight-line method over 3 years. Revenues and other operating costs are expected to be constant over the project's 4-year life. What is the project's Year 4 cash flow? $65,000 Equipment cost (depreciable basis) Straight-line depreciation rate Sales revenues, each year Operating costs (excl. deprec.) Tax rate a. $27,500 b. $28,438 c. $22,750 d. $21,000 e. $30,333 33.33% $60,000 $25,000 35.0%

Summer Tyme, Inc., is considering a new 3-year expansion project that requires an initial fixed asset investment of $2,098,350. The fixed asset will be depreciated straight-line to zero over its 3-year tax life, after which time it will be worthless. The project is estimated to generate $1,814,883 in annual sales, with costs of $1,675,390. If the tax rate is 0.33 , what is the OCF for this project?

Summer Tyme, Inc., is considering a new 3-year expansion project that requires an initial fixed asset investment of $2,380,090. The fixed asset will be depreciated straight-line to zero over its 3-year tax life, after which time it will be worthless. The project is estimated to generate $1,966,851 in annual sales, with costs of $1,680,260. If the tax rate is 0.35 , what is the OCF for this project?

Garfield, Inc., is considering a ten-year investment project with forecasted cash revenues of P400,000 per year and forecasted cash expenses of P290,000 per year. The initial cost of the equipment for the project is P230,000. The salvage value of the equipment is P90,000 at the end of the ten years of the project. The net book value of the equipment for tax purposes will be zero at the end of the ten years. The project requires a working capital investment of P70,000 at its inception and another working capital infusion of P50,000 at the end of year five. All of this working capital would be released for use elsewhere at the end of the project. The company's tax rate is 40%. What is the after-tax net cash flow in the tenth year of the project?

Acompany is evaluating the addition of equipment to its presentoperations. They need to purchase equipment for $160,000. The five year MACRS GDS Recovery Method is appropriate forthe investment and the total tax rate (federal plus state) is 40%. Gross revenue is expected to be $30,000/year while maintenance costs are expected to be $5,000/year. It is expected that the operation will be shut down at the end of the fourth year with a salvage value of $20,000. 2-Draw a BTCFD