Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Your company wants to bid on the sale of 10 customized machines per year for five years. The initial costs for the project are $1.6 million with a salvage value of $800,000 after five years. The machine will be
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- You are evaluating a project for your company. You estimate the sales price to be $500 per unit and sales volume to be 2000 units in year 1; 3000 units in year 2; and 1500 units in year 3. The project has a three-year life. Variable costs amount to $300 per unit and fixed costs are $200,000 per year. The project requires an initial investment of $325,000 in assets that will be depreciated straight-line to zero over the three-year project life. The actual market value of these assets at the end of year 3 is expected to be $50,000. NWC requirements at the beginning of each year will be approximately 25 percent of the projected sales during the coming year. The tax rate is 34 percent and the required return on the project is 12 percent. What is the operating cash flow for the project in year 2? $74,167 $192,500 $300,833 $374,500arrow_forwardAlmendarez Corporation is considering the purchase of a machine that would cost $150,000 and would last for 5 years. At the end of 5 years, the machine would have a salvage value of $18,000. By reducing labor and other operating costs, the machine would provide annual cost savings of $39,000. The company requires a minimum pretax return of 13% on all investment projects. (Ignore income taxes.) Click here to view Exhibit 7B-1 and Exhibit 7B-2, to determine the appropriate discount factor(s) using the tables provided. The net present value of the proposed project is closest to: (Round your intermediate calculations and final answer to the nearest whole dollar amount.) Multiple Choice $(45,000) Q Search (((( |個個arrow_forwardYou are considering a three-year project. The project requires buying a piece of new equipment costing $300,000, which will be depreciated straight-line to zero over 3 years. At the end of the third year of operation, the equipment will be sold for $100,000. The new project will generate $500,000 in additional annual sales and will require $200,000 in additional annual cost excluding depreciation for the next three years. The project also requires an immediate investment in net working capital of $100,000, which will be fully recovered at the end of three years. The average tax rate for the company is 40%. What is the project cash flow (cash flow from assets) for year 3?arrow_forward
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