$ Cost Use, Years Value   New Equipment 70,000.0

A28

Estimated sales Sales Price per can Cost per can Estimated life Fixed costs Tax rate Initial equipment cost Initial equipment cost will be linearly depreciated over 4 year life with $10,000 salvage value Investment in NWC 50,000 cans $6.00 $3.00 4 years $10,000/year $100,050 $196,500 $116,000 $153,200 $90,000 Cost of capital What is the operating cash flow? $20,000 20% 10%

A project using passive heating/cooling design con- a cepts to reduce energy costs requires an investment of $125,000 in equipment (straight-line deprecia- tion with a 10-year depreciable life and $0 salvage value), and $30,000 in labor (not depreciable). At the end of 10 years, the project will be terminated. Assuming a combined tax rate of 34% and after- tax MARR of l15%, determine the project's after-tax present worth.

Montego Production Company is considering an investment in new machinery for its factory. Various information about the proposed investment follows: Initial investment    $ 860,000     Useful life    6    yearsSalvage value    $ 20,000     Annual net income generated    $ 66,000     Montego’s cost of capital    11%     Assume straight line depreciation method is used.    4. Recalculate Montego's NPV assuming its cost of capital is 12 percent. (Future Value of $1, Present Value of $1, Future Value Annuity of $1, Present Value Annuity of $1.) Note: Use appropriate factor(s) from the tables provided. Negative amount should be indicated by a minus sign. Round your answer to 2 decimal places. annually:4.1114, other: 0.5066 Help Montego evaluate this project by calculating each of the following: Required:2. Payback period.

Sisters Corp expects to earn $6 per share next year. The firm's ROE is 15% and its plowback ratio is 70%. If the firm's market capitalization rate is 12% a. Calculate the price with the constant dividend growth model. b. Calculate the price with no growth

Subject: accounting

Initial investment Pretax salvage value Cost savings per year 535,000 30,000 150,000 Cost savings per year 100,000 Working capital reduction $ 60,000 Annual depreciation charge $ Aftertax salvage value 6969 107,000 22,800 Tax rate Required return *Depreciation straight-line over life 24% 11% 5 Output area: $ NPV 150,000 cost savings $ 100,000 Year Cash flow Year 0 $ (475,000) 0 $ 1 139,680 1 2 139,680 3 139,680 4 139,680 5 102,480 2345 Accept/Reject Required pretax cost savings: NPV w/o OCF Required OCF OCF less dep. tax shield Cost savings 69 69 69 $ (497,076.39) $ 134,494.11 $ 108,814.11 cost savings Cash flow (475,000) 101,680 101,680 101,680 101,680 64,480

Consider a project with a life of 4 years with the following information: initial fixed asset investment = $370,000; straight - line depreciation to zero over the 4 - year life; zero salvage value; price = $26; variable costs = $18; fixed costs $177,600; quantity sold = 85,248 units; tax rate 25 percent. How sensitive is OCF to changes in quantity sold? Multiple Choice $6.84 $6.00 $4.26 $0.17 $7.74