Manila Wines, Inc. is considering the purchase of a P1,500,000 machine that is expected to have eight years service life. It is expected to generate cash income before income tax of P400,000 annually. Income tax rate is 30%. What is the payback period ? 5.357 years O 3.75 years O 4.461 years 3.208 years

Manila Wines, Inc. is considering the purchase of a P1,500,000 machine that is expected to have eight years service life. It is expected to generate cash income before income tax of P400,000 annually. Income tax rate is 30%. What is the payback period ? 5.357 years O 3.75 years O 4.461 years 3.208 years

EBK CFIN

6th Edition

ISBN:9781337671743

Author:BESLEY

Publisher:BESLEY

Chapter10: Project Cash Flows And Risk

Section: Chapter Questions

Problem 12PROB

See similar textbooks

Similar questions

Main Content Net Revenue Years Investment You are thinking about buying a new Hot Dog cart for $7,760. Based on what the manufacturer tells you about maintenance costs and your estimate of revenues you should be able to make around $13,700 per year, for the next 7 years. Market value for the cart at that time should be about $450. According to the current asset class table the allowable depreciation rate for Hot Dog carts is 27%. If your business' tax rate is 49% and your after-tax MARR is 5%, what is the after tax annual worth of this investment? Use four decimal place accuracy for the CTF and CSF.
Question 1- A $12,000 investment will return annual benefit for six yearswith no salvage value at the end of six years. Assumestraight line depreciation and a 46% tax rate and the inflationrate is 5%. What is the inflation free after tax rate ofreturn on the investment if the annual benefits are $2,918 intoday’s dollars? a. 10.18% b. 4.94% c. 5% d. 8.20%
Question 5 Abba, Inc is considering the purchase of some new equipment that costs $240700. The new equipment is expected to increase revenues by $96000 annually. Cash expenses are expected to be $58400 and depreciation expense is $13500. The payback on this equipment is years. Enter your answer as a whole number rounded to 2 decimal places.
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"
6.1 Calculating Project NPV Paul Restaurant is considering the purchase of a $9,300 soufflé maker. The soufflé maker has an economic life of five years and will be fully depreciated by the straight-line method. The machine will produce 1,400 soufflés per year, with each costing $1.97 to make and priced at $4.95. The discount rate is 14 percent and the tax rate is 21 percent. Should the company make the purchase?
eBook The Lesseig Company has an opportunity to invest in one of two mutually exclusive machines that will produce a product the company will need for the next 8- years. Machine A has an after-tax cost of $9.3 million but will provide after-tax inflows of $4.1 million per year for 4 years. If Machine A were replaced, its after- tax cost would be $11.1 million due to inflation and its after-tax cash inflows would increase to $4.6 million due to production efficiencies. Machine B has an after-tax cost of $14.6 million and will provide after-tax inflows of $4.5 million per year for 8 years. If the WACC is 9%, which machine should be acquired? Explain, Enter your answers in millions. For example, an answer of $10,550,000 should be entered as 10.55. Do not round intermediate calculations. Round your answers to two decimal places. is the better project and will increase the company's value by $ Machine B created by Machine A Hide Feedback Incorrect O millions, rather than the s millions Work…
8Miller's Hardware plans on saving $40,000, $50,000, and $58,000 at the end of each year for the next three years, respectively. How much will the firm have saved at the end of the three years if it can earn 6% by reinvesting its saving? a. $155,944.00 b. $169,004.13 c. $148,000.00 d. $148,078.15
QUESTION 4 1 . The maintenance expense on a machine is expected to be 52,000 during the first year and to increase $200 each year for the following five years. What present sum of money (approximately) should be set aside now to pay for the required maintenance expenses over the five-year period, (Assume 5% compound interest per year). A 12.777 dollar B 10.306 dollar C 11.954 dollar D 13.601dollar
QUESTION 1 A company is considering buying a machine for $11,000. If purchased, the machine will produce annual cost savings of $3,000 for the next 5 years. The machine will be depreciated over 5 years using the 5-year MACRS schedule. At the end of the 5th year, the machine will be sold for $4,000. However, there is uncertainty about the future market value. The firm's tax rate is 35% and its discount rate is 12%. a) Based on the NPV rule, should the company accept the project? b) Based on the IRR rule, should the company accept the project? c) Build a one-way data table to examine how sensitive is the NPV to changes in the market value at the end of year 5. The data table should range from $1,000 to $6,000 in increments of $1,000.
Question 1 Bunny Businesses makes baskets. Their current machine, Bask-o-matic, has 4 years remaining, is fully depreciated and generates $8M in after-tax free cash flow per year. They can sell the current machine today for $2,000,000. They can replace the machine with the Super-o-matic. The new model costs $16M, has a 4-year life, and generates $14M in after-tax free cash flow per year. The new one cannot be salvaged, but the new depreciation laws allow the cost to be fully written off immediately. The tax rate is 25%; the required return is 9%. Find NPV of the decision. Should they replace the machine? Please explain and show the work.
QUESTION 25 A new project will generate $190,000 in new sales per year. The project costs $1,000,000 and will be depreciated using a 7-year MACRS schedule. The cash operating costs are $76,000. If the tax rate is 37%, what is the third year's ONOCFt? $419,287 $173,290 $154,199 $136,533 Onone of the above
Question 1 Eden Publishing Company Limited is planning to purchase a printing machine for $9,660,000. The machine has an estimated life of 6 years. It is estimated that the machine's maintenance expenses are around $15,600 per year and a full-time worker will be employed at a wage of S150,000 per year to operate the machine. Eden expects to generate income by producing 348,500 item X in the first 3 years, 235,000 in the 4th year and 225,000 in the 5th and 6th year. The selling price and raw material cost for each product is $50 and S15.5 respectively. The machine has a scrap value of $360,000 at the end of the 6th year. Suppose that the maintenance expenses remain no change for the 6 years. However, there is an annual rise of 3% for the worker's wage starting from the second year. (Assuming all payments and receipts occur at the beginning or the end of a year.) Prepare a table for the cash flow of the project. а. b. Calculate the NPV of the project cost of capital at 6%. с. Based on…