Mala Prohibita Inc. is evaluating a proposal to acquire a new equipment. The equipment would quire an investment of P417,860, including freight and installation cost of P40,000. It expected to have a 10- ar life with no scrap value at the end of its life. It has been estimated that the new equipment would increase e company's cash inflows, net of expenses and income taxes by P68,000. The company can issue its 7% ,000 par value bond to fund the project. The same type of bond is available in the market at P932.04836 per ond with interest payable semi-annually for ten years. The company is subject to 32% income tax. Determine the Cost of Capital (k) Using NPV and IRR method, give your recommendation if the company should push the project or not. Explain your answe

You must evaluate a proposal to buy a new milling machine. The purchase price of the milling machine, including shipping and installation costs, is $116,000, and the equipment will be fully depreciated at the time of purchase. The machine would be sold after 3 years for $57,000. The machine would require a $4,000 increase in net operating working capital (increased inventory less increased accounts payable). There would be no effect on revenues, but pretax labor costs would decline by $48,000 per year. The marginal tax rate is 25%, and the WACC is 8%. Also, the firm spent $4,500 last year investigating the feasibility of using the machine. How should the $4,500 spent last year be handled? Only the tax effect of the research expenses should be included in the analysis. Last year's expenditure should be treated as a terminal cash flow and dealt with at the end of the project's life. Hence, it should not be included in the initial investment outlay. Last year's expenditure is considered…

Esfandairi Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2.18 million. The fixed asset will be depreciated straight- line to zero over its three-year tax life, after which time it will be worthless. The project is estimated to generate $1.645 million in annual sales, with costs of $610,000. The project requires an initial investment in net working capital of $250,000, and the fixed asset will have a market value of $180,000 at the end of the project. The tax rate is 21 percent. a. What is the project's Year O net cash flow? Year 1? Year 2? Year 3? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answers in dollars, not millions of dollars, e.g., 1,234,567.) b. If the required return is 12 percent, what is the project's NPV? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) a. Year 0 cash flow a. Year 1 cash flow…

Heidi Company is considering the acquisition of a machine that costs $401,000. The machine is expected to have a useful life of 6 years, a negligible residual value, an annual net cash inflow of $128,000, and annual operating income of $88,392. The estimated cash payback period for the machine is (round to one decimal point)? a.5.5 years b.4.5 years c.4.0 years d.3.1 years