Note:-Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism.Answer completely.You will get up vote for sure. Problem 18-12 APVLonghorn, Incorporated, has produced rodeo supplies for over 20 years. Thecompany currently has a debt-equity ratio of 50 percent and the tax rate is 21 percent.The required return on the firm's levered equity is 14 percent. The company isplanning to expand its production capacity. The equipment to be purchased isexpected to generate the following unlevered cash flows:YearO123Cash Flow-$14,800,0005,500,0009,000,0008,700,000The company has arranged a debt issue of $8.7 million to partially finance theexpansion. Under the loan, the company would pay interest of 7 percent at the end ofeach year on the outstanding balance at the beginning of the year. The company alsowould make year-end principal payments of $2.9 million per year, completely retiringthe issue by the end of the third year.APVCalculate the APV of the project. (Do not round intermediate calculations and enteryour answer in dollars, not millions of dollars, rounded to 2 decimal places, e.g.,1,234,567.89)

The adjusted present worth can be computed by considering all the cash outflow that an investor will…

Answered: Longhorn, Incorporated, has produced…

EBK CFIN

6th Edition

ISBN:9781337671743

Author:BESLEY

Publisher:BESLEY

Chapter11: The Cost Of Capital

Section: Chapter Questions

Problem 20PROB

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TB MC Qu. 18-28 Joshua Industries is considering a new... Joshua Industries is considering a new project with revenue of $478,000 for the indefinite future. Cash costs are 68 percent of the revenue. The initial cost of the investment is $685,000. The tax rate is 21 percent and the unlevered cost of equity is 14.2 percent. The firm is financing $200,000 of the project cost with debt. What is the adjusted present value of the project? Multiple Choice O O O $207,975 $232,408 $202,429 $225,941 $198,311
Problem 18-19 The MoMi Corporation's cash flow from operations before interest and taxes was $4.2 million in the year just ended, and it expects that this will grow by 5% per year forever. To make this happen, the firm will have to invest an amount equal to 15% of pretax cash flow each year. The tax rate is 35%. Depreciation was $310,000 in the year just ended and is expected to grow at the same rate as the operating cash flow. The appropriate market capitalization rate for the unleveraged cash flow is 10% per year, and the firm currently has debt of $6.6 million outstanding. Use the free cash flow approach to value the firm's equity. (Round answer to nearest whole number. Enter your answer in dollars not in millions.) Value of the equity
Chapter 12 problem: Use the following information to determine cash flows for Company ABC. After you find the cash flows, also calculate NPV, IRR, and payback period: Equipment Cost Equipment purchase price: $250,000 Changes in net operating working capital Inventories will rise by $25,000 Accounts payable will rise by $5,000 Effect on operations New sales: 100,000 units/year @ $2/unit Variable cost: 75% of sales Life of the project Economic life: 4 years Salvage value: $30,000 WACC: 15% Tax Rate: 25%
Problem 6 - Shirt Corporation is considering purchasing equipment that costs $60,000 and is expected to provide the following cash inflows over its five-year useful life: Year Cash Inflow 1 $18,000 2 $22,000 3 $24,000 4 $16,000 5 $ 9,000 Calculate the payback period for this investment.
Problem 18-12 Eagle Products EBITDA is $500, its tax rate is 21%, depreciation is $30, capital expenditures are $80, and the planned increase in net working capital is $10. What is the free cash flow to the firm? (Round your answer to 2 decimal place.) Answer is complete but not entirely correct. $335.00 FCFF
2. Calculating Project NPV The Fleming Company is considering a new investment. Financial projections for the investment are tabulated below. The corporate tax rate is 22 percent. Assume all sales revenue is received in cash, all operating costs and income taxes are paid in cash, and all cash flows occur at the end of the year. All net working capital is recovered at the end of the project. Investment Sales revenue Operating costs Depreciation Net working capital spending Year 0 $32,800 450 Year 1 Year 2 Year 3 Year 4 $14,200 2,100 8,200 175 $15,900 $15,700 2,100 2,100 8,200 8,200 250 275 $12,900 2,100 8,200 ? a. Compute the incremental net income of the investment for each year. b. Compute the incremental cash flows of the investment for each year. c. Suppose the appropriate discount rate is 12 percent. What is the NPV of the project?
4 Book Consider two mutually exclusive new product launch projects that Nagano Golf is considering. Assume that the discount rate for Nagano Golf is 16 percent Project A Nagano NP-30. Professional clubs that will take an initial investment of $971,000 at time 0. Next five years (years 1-5) of sales will generate a consistent cash flow of $440,000 per year. Introduction of new product at year 6 will terminate further cash flows from this project Project B Nagano NX-20 High-end amateur clubs that will take an initial investment of $700,000 at time 0. Cash flow at year 1 is $290,000. In each subsequent year, cash flow will grow at 10 percent per year. Introduction of new product at year 6 will terminate further cash flows from this project. Year e 1 2 3 4 NP-30 -$971,000 440,000 440,000 440,000 440,000 440,000 NX-20 -$700,000 290,000 319,000 350,900 Net present value Internal rate of return 385,990 424,589 Complete the following table: (Do not round intermediate calculations. Round the…
Week 7 Giant Machinery Ltd is considering to invest in one of the two following Projects to buy a new equipment. Each project will last 5 years and have no salvage value at the end. The company’s required rate of return for all investment projects is 9%. The cash flows of the projects are provided below. Project 1 Project 2 Cost $175,000 $185,000 Future Cash flow Year1 76,000 87,000 Year2 83,000 78,000 Year3 67,000 69,000 Year4 65,000 65,000 Year5 55,000 57,000 Required: a) Identify which project should the company accept based on NPV method. (Note: Please round up the result of each calculation of PV to 2 decimal places only for simplification) b) Identify which project should the company accept based on simple pay back method if the payback criteria is maximum 2 years. c) Which project Giant Machinery should choose if two methods are in conflict.
15 the a Coastal Carolina Heating and Cooling Inc. has a 6-month backlog of orders for its patented solar beating system. To meet this demand, management plans to expand production capacity by 25% with $ 15 million investment in plant and machinery The firm wants to maintain a 55% debt level in its capital structure. It also wants to maintain its past dividend policy of distributing 50% of last year's net income. Ia 2021, net income was $5 million. How much external St equity must Coastal Carolina seek at the beginning of 2072 to expand "Heas desired? Assume that the firm uses only debt and common equity in its capital structure. Write out your answer completely. For example, 25 million should be entered as 25,000,000. Round your answer to the nearest cent. 2m 98mvexolult.com $ 355 CONVE all of 293 25568 dal 29 21 shots A 4505 Sallo 600 ll 6 (
Question # 2 Global Systėms Inc. Plans to open a new product line next year. The after tax cash inflows of the two plans is listed below. .The firm’s cost of capital is 15 percent. The initial investment for each plan is Rs5,00,000. PLAN YEAR 1 YEAR2 YEAR3 YEAR4 YEARS AB Rs300 Rs225. Rs325 Rs325 Rs150 Rs100 XY Rs150 Rs200 -"Rs300 Rs100 a) Construct the NPV profiles for PLAN AB and PLAN XY. Which PLAN has a higher IRR?. b) According to the NPV criterion which PL AN should Global Systems choose? c) Calculate the cost of capital at which the NPV and the IRR rankings conflict?. d) Which plan should the company choose? Why? *Note: All value of year 1 to 5 are in "000"
21-12 Working Capital Cash Flow Cycle Strickler Technology is considering changes in its working capital policies to improve its cash flow cycle. STrickler’s sales last year were $3,250,000 (all on credit), and its net profit margin was 7%. Its inventory turnover was 6.0 times during the year, and its DSO was 41 days, its annual cost of goods sold was $1,800,000. The firm had fixed assets totaling $535,000. Strickler’s payable deferral period is 45 days. a. Calculate Strickler’s cash conversion cycle b.Assuming Strickler hold negligible amounts of cash and marketable securities calculate its total assets turnover and ROA c. Suppose Strickler’s managers believe the annual inventory turnover can be raised to 9 times without affecting sale or profit margins. What would Strickler’s cash conversion cycle, total asset turnover, and ROA have been if the inventory turnover had been 9 for the year?
Problem 9-06 Assume Lasher’s Kitchen has pretax earnings of $150,000 after depreciation expense of $30,000. If the firm’s tax rate is 35 percent, what is its cash flow from operations? Round your answer to the nearest dollar.

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