SAP Inc. received a $1.5 million grant under its Small Business Innovation program. SAP invested the grant money and developed a system to remove metal contaminants from storm water in shipyards. The firm estimates that each shipyard spends $400,000 a year on storm water clean-up efforts. If SAP is able to sign up and retain four shipyards in the first year onwards, what is the present value (PV) of the project (net of investment) if the cost of capital for SAP is 15% per year? Assume a cost of operations and other costs for SAP equal 60% of revenue. O A. $28 million O B. $22 million OC. $2.4 million OD. $2.9 million
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- The Salalah Coffee Company is evaluating the within-plant distribution system for its new roasting, grinding, and packing plant. The finance manager could estimate the Earning before Depreciation and Tax and the project managers were given the task of first finding the Cash flow after Tax (CFAT) and then understand if the project could be accepted or rejected. The equipment will need an initial investment of OMR 41400. The useful life of the equipment is 6 years. After 6 years it will have no salvage value. The cost of capital is 8% Earning before Depreciation and Tax are as follows : - Earnings Before Depreciation and Tax (OMR) Year 5 Year 1 Year 2 Year 3 Year 4 Year 6 14000 14000 16200 18400 20600 26800 Depreciation is calculated on a straight line method and the tax rate is 25%. Evaluate the Project on the basis of NPV and choose the option below? O NPV is negative and the project can be rejected O NPV is 34450 and the project can be accepted O NPV is 27269 and the project can be…SAP Inc. received a $1.5 million grant under its Small Business Innovation program. SAP invested the grant money and developed a system to remove metal contaminants from storm water in shipyards. The firm estimates that each shipyard spends $500,000 a year on storm water clean-up efforts. If SAP is able to sign up and retain four shipyards in the first year onwards, what is the present value (PV) of the project (net of investment) if the cost of capital for SAP is 14% per year? Assume a cost of operations and other costs for SAP equal 50% of revenue. $5.64 million $4.80 million $4.51 million $5.93 millionSheldon Coopers Lab Services (SCLS) is bidding upon a service contract to maintain and upgrade 5 of the University's science labs per year for the next six years. The contract will require purchasing $972,000 in equipment that will be depreciated using straight-line depreciation to a zero book value over the project's life. The equipment can be sold for $325,000 at the end of the service contract. They will also need $140,000 in net working capital over the life of the contract. While performing the contract work, they expect to incur fixed costs of $500,000 per year and a variable cost of $226,000 per lab. They will also face a corporate tax rate of 21%. If the required rate of return is 15%, what is the minimum offer they can make per lab and still turn an economic profit?
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- Blossom Corporation's Central region operates an investment center. John Meadows, the region's director, has set a 15% required minimum rate of return. John is considering investing in a $51,000 machine that is expected to generate $21.000 in additional income. Calculate the machine's residual income. Machine's residual incomeRaytheon wishes to use an automated environmental chamber in the manufacture of electronic components. The chamber is to be used for rigorous reliability testing and burn-in. It is installed for $1.4 million and will have a salvage value of $200,000 after 8 years. Raytheon will borrow $800,000 at 12% to be paid back over 8 years. The environmental chamber will create an opportunity to increase sales by $650,000 per year and will have operating expenses of $250,000 per year. All dollar amounts are expressed in real dollars. Depreciation follows MACRS 5-year property, taxes are 25%, the real aftertax MARR is 10%, and inflation is 4.2%. Determine the actual after-tax cash flows for each year and the PW, FW, AW, IRRc, ERRc, IRRr, and ERRr for each of the four loan payment plans as: a. Plan 1. b. Plan 2. c. Plan 3. d. Plan 4. e. Which is the preferred plan for Raytheon?An engineer developed a fee proposal that requests the owner pay $20,000 after 6 months of work and $40,000 after 12 months. The engineer spent $8.000 developing the proposal and will spend $4,000 each month working on the project. The engineer can borrow funds at enn- 12% per year, invest at eny 6% per year, and desires an MARR of 9%. Using MIRR analysis, determine the attractiveness of this project. O Attractive O Not Attrative O No answer text provided. O No answer text provided.
- Consider the following project of Hand Clapper, Incorporated. The company is considering a four-year project to manufacture clap-command garage door openers. This project requires an initial investment of $14 million that will be depreciated straight- line to zero over the project's life. An initial investment in net working capital of $590,000 is required to support spare parts inventory; this cost is fully recoverable whenever the project ends. The company believes it can generate $11.6 million in pretax revenues with $4.4 million in total pretax operating costs. The tax rate is 21 percent and the discount rate is 11 percent. The market value of the equipment over the life of the project is as follows: Year Market Value (millions) a. 1 $ 11.2 9.1 234 4.9 1.3 Assuming the company operates this project for four years, what is the NPV? (Do not round intermediate calculations and enter your answer in dollars, not millions, rounded to 2 decimal places, e.g., 1,234,567.89.) b-1. Compute…Scottech is examining an investment opportunity that will involve buying $120,000 worth of equipment. They will need $10,000 in net working capital up front. Shipping will cost $5,000 and installation will cost $10,000. The firm paid a management consultant $4,000 to analyze this project, which is supposed to increase sales by $20,000 per year. If the firm accepts the project, they will have to spend $3,500 to train the employees to use the new equipment. The corporate tax rate is 21%. What is the initial outlay for the project? ($150,500) ($130,500) ($126,500) O ($148,500) O ($123,000)Consider the following project of Hand Clapper, Incorporated. The company is considering a four-year project to manufacture clap-command garage door openers. This project requires an initial investment of $13.8 million that will be depreciated straight-line to zero over the project's life. An initial investment in net working capital of $585,000 is required to support spare parts inventory; this cost is fully recoverable whenever the project ends. The company believes it can generate $11.4 million in pretax revenues with $4.3 million in total pretax operating costs. The tax rate is 25 percent and the discount rate is 10 percent. The market value of the equipment over the life of the project is as follows: Market Value (millions) a. Year 1 $ 11.0 234 9.0 4.8 1.2 Assuming the company operates this project for four years, what is the NPV? (Do not round intermediate calculations and enter your answer in dollars, not millions, rounded to 2 decimal places, e.g., 1,234,567.89.) b-1. Compute…