A project requires initial asset investment of $1 million. The asset will last for 8 years, and will be depreciated for tax purposes at the CCA rate of 30%. The requiredreturn on this project is 16%, and the marginal corporate tax rate is 36%. Assuming that the asset will have a salvage value of $50,000 at the end of Year 8. what isthe present value of the CCA tax shields from this project?Multiple Choice204111.57$215.009.97$218.59071$234.782.61

[(cost of machine* CCA rate*tax rate/CCA rate + required return) *( 1+05.* Required return/1+…

Answered: project requires initial asset…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Ignore income taxes in this problem.) Your Company is considering a project with an 8-year life. Your required rate of return is 10%. What is the net present value of the project? Project Cost of equipment needed now $80,000 Working capital investment needed now 115,000 Annual cash operating inflows 27,000 Salvage value of equipment in 6 years 0 Group of answer choices ($ 270). $ 2,750. $73,375. ($26,625).
Hh.27.
q4d-Project A requires an initial outlay of $10000 and will last for 5 years. The investment will be depreciated using straight‐line depreciation to a book value of 0 over the life of the project. The corporate tax rate is 30% and the required rate of return is 8%. What is the present value of Project A’s depreciation tax shields?
Give typing answer with explanation and conclusion
19.Sunshine Love Company is considering two mutually exclusive project, one with a 4-year life and the other 6-year life. The after-tax cash flows from the two project are as follows: Project A (RM) |(400,000) Project B (RM) (400,000) Year 1 162,000 120,000 162,000 162,000 120,000 120,000 4 120,000 120,000 Assuming a 15 % required rate of return on both project, calculate each project's
XYZ is considering two mutually exclusive projects called A and B. The initial cost of project A is $100000 and it generates the after tax cash flow of 15000 per year forever. The initial cost of project A is $150000 and it generates the after tax cash flow of 18000 per year forever. What is the cross over rate for project A and B if the discount rate is 10%? 9% 5% 6% 10%
ABC is considering investing in a project that has an initial cost of $560,000. The project will earn unlevered free cash flows (FCFF) of $96, 000 per year in perpetuity. The unlevered cost of capital is 20% and the tax rate is 40%. What is the NPV of the unlevered project? Group of answer choices $400,000 $80, 000 $480,000 $80, 000
Please answer very fast then i ll upvote. XYZ Limited is considering two projects. Each requires an immediate cash outlay: $10,000 for A, $9,000 for B. Project A has a life of four years, project B five years; neither will have any salvage value at the end of its life. For tax purposes, each would be depreciated by the straight-line method, project A at 30 percent, project B at 24 percent. The company’s tax rate is 40 percent, and its required rate of return after tax is 11 percent. Net cash flows before taxes have been projected as follows. Year 1 2 3 4 5 Project A 3200 3200 4000 4100 Project B 4000 4000 1900 1800 1800 a)calculate the net cash flows after tax for each project. (Assume that XYZ Limited has a substantial taxable income so that,where a project has a negative taxable income in a particular year, this will give rise to a tax saving by the firm.) b) Compute the payback for each investment. c) Compute the average rate of return for each investment. d) Compute…
A 7-year project is expected to provide annual sales of $221,000 with costs of $97,500. The equipment necessary for the project will cost $360,000 and will be depreciated on a straight-line method over the life of the project. You feel that both sales and costs are accurate to +/-15 percent. The tax rate is 21 percent. What is the annual operating cash flow for the worst-case scenario? es Multiple Choice $77,946 $44,504 0 $70,623 $129,329 $49.221
Need help with entire problem.
A capital project requires a $50,000 increase in working capital. It also requires equipment at a price of $200,000. It takes $20,000 to install the equipment and $15,000 to ship the equipment to the desired location. The income tax rate is 35% and equipment is depreciated for income tax purposes on a straight line basis.What is the project's initial cash flow?Group of answer choices A.200,000 B.120,000 C.285,000 D.235,000 E. 250,000
A project requires an increase of $2100 in Net Working Capital at the beginning of the project, which will be fully recovered after the completion of the project. Equipment with a book value of $11,000 will be sold at the end of the project for a salvage value of $6,000. The tax rate is 20%. What is the incremental free cash flow in the year following the end of the project? Question 3Answer a. $9100 b. $7100 c. $4900 d. $2900

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