You are the CFO of Ivanhoe, Inc., a retailer of the exercise machine Ivanhoe6 and related accessories. Your firm is considering oper a new store in Los Angeles. The store will have a life of 20 years. It will generate annual sales of 5,500 exercise machines, and the p of each machine is $2,750. The annual sales of accessories will be $756,000, and the operating expenses of running the store, inclu labor and rent, will amount to 50 percent of the revenues from the exercise machines. The initial investment in the store will equal $34,900,000 and will be fully depreciated on a straight-line basis over the 20-year life of the store. Your firm will need to invest $2,000,000 in additional working capital immediately and recover it at the end of the investment. Your firm's marginal tax rate is 3 percent. The opportunity cost of opening up the store is 12.20 percent. What are the incremental free cash flows from this project at the beginning of the project as well as in years 1-19 and 20? (Do not round intermediate calculations. Round NPV answer to 2 decimal places, eg. 5,275.25 and all other answers to O decimal places, eg. 5,275 Incremental cash flow at the beginning of the project $ Incremental cash flow in the years 1-19

Business at your design engineering firm has been brisk. To keep up with the increasing workload, you are considering the purchase of a new state-of-the-art CAD/CAM system costing $550,000, which would provide 4,500 hours of productive time per year. Your firm puts a lot of effort into drawing new product designs. At present, this is all done by design engineers on an old CAD/CAM system installed five years ago. If you purchase the system, 40% of the productive time will be devoted to drawing (CAD) and the remainder to CAM. While drawing, the system is expected to out-produce the old CAD/CAM system by a factor of 2.1. You estimate that the additional annual out-of-pocket cost of maintaining the new CAD/CAM system will be $155,000, including any tax effects. The expected useful life of the system is eight years, after which the equipment will have no residual value. As an alternative, you could hire more design engineers. Each normally works 1,800 hours per year, and 50% of this time is…

After spending $9,600 on client-development, you have just been offered a big production contract by a new client. The contract will add $196,000 to your revenues for each of the next five years and it will cost you $96,000 per year to make the additional product. You will have to use some existing equipment and buy new equipment as well. The existing equipment is fully depreciated, but could be sold for $45,000 now. If you use it in the project, it will be worthless at the end of the project. You will buy new equipment valued at $29,000 and use the 5-year MACRS schedule to depreciate it. It will be worthless at the end of the project. Your current production manager earns $79,000 per year. Since she is busy with ongoing projects, you are planning to hire an assistant at$38,000 per year to help with the expansion. You will have to immediately increase your inventory from $20,000 to $30,000. It will return to $20,000 at the end of the project is 21% and your discount rate is 14.7%. What…

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