Mersey Chemicals manufactures polypropylene that it ships to its customers via tank car. Currently it plans to add two additional tank cars to its fleet four years from now.​ However, a proposed plant expansion will require​ Mersey's transport division to add these two additional tank cars in 1 years' time rather than in 4 years. The current cost of a tank car is $1.9 million, and this cost is expected to remain constant.​ Also, while tank cars will last​ indefinitely, they will be depreciated​ straight-line over a​ five-year life for tax purposes. Suppose​ Mersey's tax rate is 20%. When evaluating the proposed​ expansion, what incremental free cash flows should be included to account for the need to accelerate the purchase of the tank​ cars? Incremental FCF for year 0 is how much? (Round to two decimal places and outflows as negative​ values.)

The Elite Car Rental Corporation is contemplating expanding its short-term rental fleet by 30 automobiles at a cost of $900,000. It expects to keep the autos for only two years and to sell them at the end of that period for 60 percent, on average, of what they cost. The plan is to generate $21,000 of incremental revenue per additional auto in each year of operation. The controller estimates that other costs will amount to 20 cents per kilometre on an average of 40,000 kilometres per car per year. She also estimates that the new business will require an investment of $10,000 in additional working capital. The firm is in a 30 percent tax bracket and uses 12 percent as a cost of capital. a. Calculate the NPV. (Do not round the intermediate calculations. Round the final answer to the nearest whole dollar. Negative answer should be indicated by a minus sign. Omit $ sign in your response.) NPV $204286 ง b. Should Elite purchase the automobiles? Yes No

Sagar

BRAC is considering investing $100000 in a new machine with an expected life of 5 years. The machine will have no scrap value at the end of the 5 years. It is expected that 20000 units will be sold each year at a selling prices of $6.00 per unit. Variable production costs are expected to $2.30 per unit, while incremental fixed costs, mainly the wages of a maintenance engineer, are expected to be $10000 per years. BRAC uses a discount rate of 11% for investment appraisal purposes and expects investment projects to recover their initial investment within two years. Required: (1) Explain why risk and uncertainty should be considered in the investment appraisal process.                                                                                            (2) Calculate and comment on the payback period of the project.  (3) Evaluate the sensitivity of the projects net present value to a change in the following project variables: sales volume sales price variable cost and discuss the…