Companies invest in expansion projects with the expectation of increasing the earnings of its business. Consider the case of Blue Llama Mining: Blue Llama Mining is considering an investment that will have the following sales, variable costs, and fixed operating costs:   Year 1 Year 2 Year 3 Year 4 Unit sales (units) 3,500 4,000 4,200 4,250 Sales price $38.50 $39.88 $40.15 $41.55 Variable cost per unit $22.34 $22.85 $23.67 $23.87 Fixed operating costs except depreciation $37,000 $37,500 $38,120 $39,560           Accelerated depreciation rate 33% 45% 15% 7%   This project will require an investment of $25,000 in new equipment. The equipment will have no salvage value at the end of the project’s four-year life. Blue Llama Mining pays a constant tax rate of 40%, and it has a required rate of return of 11%. When using accelerated depreciation, the project’s net present value (NPV) is $36,373   When using straight-line depreciation, the project’s NPV is $35,945   No other firm would take on this project if Blue Llama Mining turns it down. How much should Blue Llama Mining reduce the NPV of this project if it discovered that this project would reduce one of its division’s net after-tax cash flows by $400 for each year of the four-year project? Choose one A- $931   B- $1,055   C- $745   D- $1,241     The project will require an initial investment of $25,000, but the project will also be using a company-owned truck that is not currently being used. This truck could be sold for $18,000, after taxes, if the project is rejected. What should Blue Llama Mining do to take this information into account? CHOOSE ONE   A- The company does not need to do anything with the value of the truck because the truck is a sunk cost.   B- Increase the amount of the initial investment by $18,000.   C-Increase the NPV of the project by $18,000.   Please answer if it's A,B,C, or D in part one and if it's A,B or C in part two

A company is considering a project with a cash break-even point of 25,394 units. The selling price is RM18 a unit, the variable cost per unit is RM8, and depreciation is RM89, 800. What is the projected amount of fixed costs? Select one: a. RM253,94O b. RM306,108 c. RM324,512 d. RM316,728

1. DPCL is a small-sized firm manufacturing hand tools. Its manufacturing plant is situated in Sohar. The company’s sales in the year ending December 2014 were OMR 1000 million on an asset base of OMR 650 million. The net profit of the company is OMR76 million. The management of the company wants to improve profitability further. The required rate of return of the company is 10%. The company is currently considering two investment proposals. One is to expand its production capacity. The estimated cost of the new equipment is OMR 250 million and has a life of 10 years. Forecasts of cash inflows would be OMR45 million per annum for the first 3 years, OMR 68 million from 4 to 8 years and OMR 30 million for the last 2 years. The plant can be sold for 55 million at the end of its economic life.   The second proposal is to replace one of the old machines in Sohar to reduce the cost of operations. The new machine will cost OMR 50 million. The life of the machine is 10 years without any…

Maps News -mework i t a Interstate Manufacturing is considering either overhauling an old machine or replacing it with a new machine. Information about the two alternatives follows. Management requires a 8% rate of return on its investments. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) Alternative 1: Keep the old machine and have it overhauled. This requires an initial investment of $146,000 and results in $40,000 of net cash flows in each of the next five years. After five years, it can be sold for a $23,000 salvage value. Alternative 2: Sell the old machine for $40,000 and buy a new one. The new machine requires an initial investment of $295,000 and can be sold for a $11,000 salvage value in five years. It would yield cost savings and higher sales, resulting in net cash flows of $49,000 in each of the next five years. Required: 1. Determine the net present value of alternative 1. 2. Determine the net present value of alternative…