Problem 18-7 NPV for an All-Equity Company Jiminez, Incorporated, is an all-equity firm. The cost of the company's equity is currently 11.5 percent and the risk-free rate is 4.4 percent. The company is currently considering a project that will cost $11.94 million and last six years. The company uses straight-line depreciation. The project will generate revenues minus expenses each year in the amount of $3.55 million. If the company has a tax rate of 23 percent, what is the net present value of the project? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to 2 decimal places, e.g., 1,234,567.89) Net present $ 6,886,082.02 value
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- Problem 13-16 WACC and NPV Lebleu, Incorporated, is considering a project that will result in initial aftertax cash savings of $1.86 million at the end of the first year, and these savings will grow at a rate of 2 percent per year indefinitely. The company has a target debt-equity ratio of .8, a cost of equity of 12.6 percent, and an aftertax cost of debt of 5.4 percent. The cost- saving proposal is somewhat riskier than the usual projects the firm undertakes; management uses the subjective approach and applies an adjustment factor of +3 percent to the cost of capital for such risky projects. What is the maximum initial cost the company would be willing to pay for the project? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to 2 decimal places, e.g., 1,234,567.89) Maximum cost ..........OLA #11.1 A company is considering an investment that requires an immediate investment of $475,000 and an additional investment of $125,000 in year 3. The investment will generate annual profits of $170,000 for five years, starting from year 2. a. Calculate the IRR for this investment. b. If the cost of capital is 7.5%, should the company undertake the investment? Yes or No Kindly add all the decimals DO NOT ROUNDTB 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
- 14 NuPress Valet has a proposed investment with an initial cost of $62 million and cash flows of $12.5 million for 5 years. Debt represents 44 percent of the capital structure. The cost of equity is 13.7 percent, the pretax cost of debt is 8.5 percent, and the tax rate is 34 percent. What is the company's WACC?Week 4Giant Equipment Ltd. is considering two projects to invest next year. Both projects have the same start-up costs. Project A will produce annual cash flows of $42,000 at the beginning of each year for eight years. Project B will produce cash flows of $48,000 at the end of each year for seven years. Thecompany requires a 12% return.Required:a) Which project should the company select and why? b) Which project should the company select if the interest rate is 14% at the cash flows in Project B is also at the beginning of each year?QUESTION 36 Advanced Products is considering the purchase of a computer-aided manufacturing system that requires an initial investment of $1,750,000 and is expected to provide an increase in net income of $200,000 and average annual cash benefits and savings of $250,000 each year for the next 10 years. Their current cost of capital is 10%. Following are selected factors from tables for 10 years at 10%: FV of $1 FVOA PV of $1 PVOA 2.59374 15.93742 0.38554 6.14457 Required: Compute the Accounting Rate of Return of the investment 14.3% 8% 10% 11.4%
- QUESTION 33 Advanced Products is considering the purchase of a computer-aided manufacturing system that requires an initial investment of $1,750,000 and is expected to provide an increase in net income of $200,000 and average annual cash benefits and savings of $250,000 each year for the next 10 years. Their current cost of capital is 10%. Following are selected factors from tables for 10 years at 10%: FV of $1 FVOA PV of $1 PVOA 2.59374 15.93742 0.38554 6.14457 Required: Compute the present value of the cash inflows/savings $1,536,142.50 $648,435 $963,850 $2,500,000Saved Help Sa Problem 12-16 WACC and NPV Pink, Inc., is considering a project that will result in Initial aftertax cash savings of $1.77 million at the end of the first year, and these savings will grow at a rate of 1 percent per year indefinitely. The firm has a target debt-equity ratio of 75, a cost of equity of 11.7 percent, and an aftertax cost of debt of 4.5 percent. The cost-saving proposal is somewhat riskler than the usual projects the firm undertakes; management uses the subjective approach and applies an adjustment factor of +2 percent to the cost of capital for such risky projects. What is the maximum initial cost the company would be willing to pay for the project? (Do not round intermedlate calculations and enter your answer in dollars, not millions of dollars, rounded to 2 decimal places, e.g, 1,234,567.89.) Maximum cost S 180,986,062.00QUESTION 34 Advanced Products is considering the purchase of a computer-aided manufacturing system that requires an initial investment of $1,750,000 and is expected to provide an increase in net income of $200,000 and average annual cash benefits and savings of $250,000 each year for the next 10 years. Their current cost of capital is 10%. Following are selected factors from tables for 10 years at 10%: FV of $1 FVOA PV of $1 PVOA 2.59374 15.93742 0.38554 6.14457 Required: Compute the net present value of the investment $0 $750,000 $(213,857.50) $1,000,000