Temple Corp. is considering a new project whose data are shown below. The equipment that would be used has a 3-year tax life. Under the new tax law, the equipment used in the project is eligible for 100% bonus depreciation, so it will be fully depreciated at t = 0. The equipment would have a zero salvage value at the end of the project’s life. No change in net operating working capital (NOWC) would be required. Revenues and operating costs are expected to be constant over the project's 3-year life. What is the project's NPV? Do not round the intermediate calculations and round the final answer to the nearest whole number. Risk-adjusted WACC 10.0% Equipment cost $65,000 Sales revenues, each year $55,500 Annual operating costs $25,000 Tax rate 25.0%

Temple Corp. is considering a new project whose data are shown below. The equipment that would be used has a 3-year tax life. Under the new tax law, the equipment used in the project is eligible for 100% bonus depreciation, so it will be fully depreciated at t = 0. The equipment would have a zero salvage value at the end of the project’s life. No change in net operating working capital (NOWC) would be required. Revenues and operating costs are expected to be constant over the project's 3-year life. What is the project's NPV? Do not round the intermediate calculations and round the final answer to the nearest whole number. Risk-adjusted WACC 10.0% Equipment cost $65,000 Sales revenues, each year $55,500 Annual operating costs $25,000 Tax rate 25.0%

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter19: Capital Investment

Section: Chapter Questions

Problem 18E

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Temple Corp. is considering a new project whose data are shown below. The equipment that would be used has a 3-year tax life. Under the new tax law, the equipment used in the project is eligible for 100% bonus depreciation, so it will be fully depreciated at t = 0. The equipment would have a zero salvage value at the end of the project’s life. No change in net operating working capital (NOWC) would be required. Revenues and operating costs are expected to be constant over the project's 3-year life. What is the project's NPV? Do not round the intermediate calculations and round the final answer to the nearest whole number. Risk-adjusted WACC 10.0% Equipment cost $65,000 Sales revenues, each year $55,500 Annual operating costs $25,000 Tax rate 25.0%
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Temple Corp. is considering a new project whose data are shown below. The equipment that would be used has a 3-year tax life. Under the new tax law, the equipment used in the project is eligible for 100% bonus depreciation, so it will be fully depreciated at t = o. The equipment would have a zero salvage value at the end of the project's life. No change in net operating working capital (NOWC) would be required. Revenues and operating costs are expected to be constant over the project's 3-year life. What is the project's NPV? Do not round the intermediate calculations and round the final answer to the nearest whole number. Risk-adjusted WACC Equipment cost Sales revenues, each year Annual operating costs Tax rate a. $7,918 b. $12,268 c. $13,494 d. $5,189 e. $10,557 10.0% $63,800 $51,400 $21,500 25.0%
Florida Car Wash is considering a new project whose data are shown below. The equipment to be used has a 3-year tax life. Under the new tax law, the equipment is eligible for 100% bonus depreciation, so it will be fully depreciated at t = 0. At the end of the project's 3 - year life, it would have zero salvage value. No change in net operating working capital (NOWC) would be required for the project. Revenues and operating costs will be constant over the project's life, and this is just one of the firm's many projects, so any losses on it can be used to offset profits in other units. If the number of cars washed declined by 40% from the expected level, by how much would the project's NPV change? (Hint: Note that cash flows are constant at the Year 1 level, whatever that level is.) Do not round the intermediate calculations and round the final answer to the nearest whole number. WACC 10.0% Equipment cost $48,000 Number of cars washed 3,000 Average price per car $24.00 Fixed op. cost…
Florida Car Wash is considering a new project whose data are shown below. The equipment to be used has a 3-year tax life. Under the new tax law, the equipment is eligible for 100% bonus depreciation, so it will be fully depreciated at t = 0. At the end of the project's 3-year life, it would have zero salvage value. No change in net operating working capital (NOWC) would be required for the project. Revenues and operating costs will be constant over the project's life, and this is just one of the firm's many projects, so any losses on it can be used to offset profits in other units. If the number of cars washed declined by 40% from the expected level, by how much would the project's NPV change? (Hint: Note that cash flows are constant at the Year 1 level, whatever that level is.) Do not round the intermediate calculations and round the final answer to the nearest whole number. WACC 10.0% Equipmentcost $60,000 Number of cars washed 2,960 Average price per car…
Your company, CSUS Inc., is considering a new project whose data are shown below. The required equipment has a 3-year tax life. Under the new law, the equipment used in the project is eligible for 100% bonus depreciation, so the equipment will be fully depreciated at t = 0. The equipment has no salvage value at the end of the project's life, and the project does not require any additional operating working capital. Revenues and operating costs are expected to be constant over the project's 10-year expected operating life. What is the project's Year 4 cash flow? Equipment cost Sales revenues, each year $70,000 $38,500 $25,000 Operating costs Tax rate 25.0% Oa. $13,500 Ob. $16,875 Oc. $10,800 Od. $10,125 Oe. $15,958
Thomson Media is considering some new equipment whose data are shown below. The equipment has a 3-year tax life. Under the new tax law, the equipment is eligible for 100% bonus depreciation, so it will be fully depreciated at t = 0. The equipment would have a positive pre-tax salvage value at the end of Year 3, when the project would be closed down. Also, additional net operating working capital (NOWC) would be required, but it would be recovered at the end of the project's life. Revenues and operating costs are expected to be constant over the project's 3-year life. What is the project's NPV? Do not round the intermediate calculations and round the final answer to the nearest whole number. WACC 10.0% Equipment cost $70,000 Required net operating working capital (NOWC) $10,000 Annual sales revenues $61,000 Annual operating costs $30,000 Expected pre-tax salvage value $5,000 Tax rate 25.0% Please explain and provide calculations.
Thomson Media is considering some new equipment whose data are shown below. The equipment has a 3-year tax life. Under the new tax law, the equipment is eligible for 100% bonus depreciation, so it will be fully depreciated at t = 0. The equipment would have a positive pre-tax salvage value at the end of Year 3, when the project would be closed down. Also, additional net operating working capital (NOWC) would be required, but it would be recovered at the end of the project's life. Revenues and operating costs are expected to be constant over the project's 3-year life. What is the project's NPV? Do not round the intermediate calculations and round the final answer to the nearest whole number. WACC 10.0% Equipment cost $70,000 Required net operating working capital (NOWC) $10,000 Annual sales revenues $61,000 Annual operating costs $30,000 Expected pre-tax salvage value $5,000 Tax rate 25.0%
Thomson Media is considering some new equipment whose data are shown below. The equipment has a 3-year tax life. Under the new tax law, the equipment is eligible for 100% bonus depreciation, so it will be fully depreciated at t = 0. The equipment would have a positive pre-tax salvage value at the end of Year 3, when the project would be closed down. Also, additional net operating working capital (NOWC) would be required, but it would be recovered at the end of the project's life. Revenues and operating costs are expected to be constant over the project's 3-year life. What is the project's NPV? Do not round the intermediate calculations and round the final answer to the nearest whole number. WACC 10.0% Equipment cost $70,000 Required net operating working capital (NOWC) $10,000 Annual sales revenues $61,000 Annual operating costs $30,000 Expected pre-tax salvage value $5,000 Tax rate 25.0% a. $3,772 b. $5,319 c. $5,650…
Thomson Media is considering some new equipment whose data are shown below. The equipment has a 3-year tax life and would be fully depreciated by the straight-line method over 3 years, but it would have a positive pre-tax salvage value at the end of Year 3, when the project would be closed down. Also, additional net operating working capital would be required, but it would be recovered at the end of the project's life. Revenues and other operating costs are expected to be constant over the project's 3-year life. What is the project's NPV? Do not round the intermediate calculations and round the final answer to the nearest whole number. WACC 10.0% Net investment in fixed assets (depreciable basis) $70,000 Required net operating working capital $10,000 Straight-line depreciation rate 33.333% Annual sales revenues $85,000 Annual operating costs (excl. depreciation) $30,000 Expected pre-tax salvage value $5,000 Tax rate 35.0% Group of answer choices…
Thomson Media is considering some new equipment whose data are shown below. The equipment has a 3-year tax life and would be fully depreciated by the straight-line method over 3 years, but it would have a positive pre-tax salvage value at the end of Year 3, when the project would be closed down. Also, additional net operating working capital would be required, but it would be recovered at the end of the project's life. Revenues and other operating costs are expected to be constant over the project's 3-year life. What is the project's NPV? Do not round the intermediate calculations and round the final answer to the nearest whole number. WACC 10.0% Net investment in fixed assets (depreciable basis) $70,000 Required net operating working capital $10,000 Straight-line depreciation rate 33.333% Annual sales revenues $70,000 Annual operating costs (excl. depreciation) $30,000 Expected pre-tax salvage value $5,000 Tax rate 35.0% a. 0$14,773…
Thomson Media is considering some new equipment whose data are shown below. The equipment has a 3-year tax life and would be fully depreciated by the straight-line method over 3 years, but it would have a positive pre-tax salvage value at the end of Year 3, when the project would be closed down. Also, additional net operating working capital would be required, but it would be recovered at the end of the project's life. Revenues and other operating costs are expected to be constant over the project's 3-year life. What is the project's NPV? Do not round the intermediate calculations and round the final answer to the nearest whole number. WACC 10.0% Net investment in fixed assets (depreciable basis) $70,000 Required net operating working capital $10,000 Straight-line depreciation rate 33.333% Annual sales revenues $57,000 Annual operating costs (excl. depreciation) $30,000 Expected pre-tax salvage value $5,000 Tax rate 35.0% Choices: $–6,092 $-6,518 $-7,371 $-6,213 $-7,005 Give typing…