Fundamentals Of Financial Management, Concise Edition (mindtap Course List)
10th Edition
ISBN: 9781337902571
Author: Eugene F. Brigham, Joel F. Houston
Publisher: Cengage Learning
expand_more
expand_more
format_list_bulleted
Question
Chapter 12, Problem 2P
a.
Summary Introduction
To compute: The project’s cash flow for the first year.
Project Cash Flows:
Cash flow statement is prepared to see that the position of cash. The cash flow for the specific project is known as the project cash flow.
b.
Summary Introduction
To compute: The cash flow of project when the cash flow before tax is $0.5 million.
Expert Solution & Answer
Trending nowThis is a popular solution!
Students have asked these similar questions
In your first job with TBL Inc. your task is to consider a new project whose data are shown below. What is the project's Year 1 cash flow?
The annual operating cash flows of the project can be calculated as follows:
OCF = {[Sales - Operating Costs]*(1-Tax Rate)} + (Depreciation * Tax Rate)
Sales revenues
$225,250
Depreciation
$78,847
Other operating costs
$92,000
Tax rate
18%
Colsen Communications is trying to estimate the first-year cashflow (at Year 1) for a proposed project. The financial staff has collected the following informationon the project:Sales revenues $15 millionOperating costs (excluding depreciation) 10.5 millionDepreciation 3 millionInterest expense 3 millionThe company has a 40% tax rate, and its WACC is 11%.a. What is the project’s cash flow for the first year (t = 1)?b. If this project would cannibalize other projects by $1.5 million of cash flow before taxesper year, how would this change your answer to part a?c. Ignore part b. If the tax rate dropped to 30%, how would that change your answer topart a?
A company is trying to estimate the first-year cash flow (at Year 1) for a proposed project. The financial
staff has collected the following information on the project:
Sales
$16.2 million
Optg costs (Excluding Depreciation)
$11.5 million
Depreciation
$2.2 million
Interest Expense
$1.7 million
The company has a 40% tax rate, and its WACC is 11%. What is the project's cash flow in year 1? Express
your answer in millions and round to the nearest decimal place. (For example, if your answer is $13.26
million, enter 13.3)
Chapter 12 Solutions
Fundamentals Of Financial Management, Concise Edition (mindtap Course List)
Ch. 12 - Prob. 1QCh. 12 - Prob. 2QCh. 12 - Explain why net operating working capital is...Ch. 12 - Prob. 4QCh. 12 - Prob. 5QCh. 12 - Prob. 6QCh. 12 - Prob. 7QCh. 12 - Prob. 8QCh. 12 - Prob. 9QCh. 12 - If you were the CFO of a company that had to...
Ch. 12 - Prob. 11QCh. 12 - REQUIRED INVESTMENT Tannen Industries is...Ch. 12 - Prob. 2PCh. 12 - AFTER-TAX SALVAGE VALUE Karsted Air Services is...Ch. 12 - REPLACEMENT ANALYSIS The Oviedo Company is...Ch. 12 - OPTIMAL CAPTTAL BUDGET Marble Construction...Ch. 12 - DEPRECIATION METHODS Charlene is evaluating a...Ch. 12 - SCENARIO ANALYSIS Huang Industries is considering...Ch. 12 - NEW PROJECT ANALYSIS You must evaluate the...Ch. 12 - NEW PROJECT ANALYSIS You must evaluate a proposal...Ch. 12 - Dauten is offered a replacement machine which has...Ch. 12 - REPLACEMENT ANALYSIS St. Johns River Shipyards is...Ch. 12 - PROJECT RISK ANALYSIS The Butler-Perkins Company...Ch. 12 - NEW PROJECT ANALYSIS Holmes Manufacturing is...Ch. 12 - REPLACEMENT ANALYSIS The Darlington Equipment...Ch. 12 - REPLACEMENT ANALYSIS The Bigbee Bottling Company...Ch. 12 - ABANDONMENT OPTION The Sorensen Supplies Company...Ch. 12 - OPTIMAL CAPITAL BUDGET Hampton Manufacturing...
Knowledge Booster
Similar questions
- Gallant Sports s considering the purchase of a new rock-climbing facility. The company estimates that the construction will require an initial outlay of $350,000. Other cash flows are estimated as follows: Assuming the company limits its analysis to four years due to economic uncertainties, determine the net present value of the rock-climbing facility. Should the company develop the facility if the required rate of return is 6%?arrow_forwardEdelman Engineering is considering including two pieces of equipment, a truck and an overhead pulley system, in this year’s capital budget. The projects are independent. The cash outlay for the truck is $17,100, and that for the pulley system is $22,430. The firm’s cost of capital is 14%. After-tax cash flows, including depreciation, are as follows: Calculate the IRR, the NPV, and the MIRR for each project, and indicate the correct accept/reject decision for each.arrow_forwardThe management of Ryland International Is considering Investing in a new facility and the following cash flows are expected to result from the investment: A. What Is the payback period of this uneven cash flow? B. Does your answer change if year 6s cash inflow changes to $920,000?arrow_forward
- There are two projects under consideration by the Rainbow factory. Each of the projects will require an initial investment of $35,000 and is expected to generate the following cash flows: Use the information from the previous exercise to calculate the internal rate of return on both projects and make a recommendation on which one to accept. For further instructions on internal rate of return in Excel, see Appendix C.arrow_forwardYour company is planning to purchase a new log splitter for is lawn and garden business. The new splitter has an initial investment of $180,000. It is expected to generate $25,000 of annual cash flows, provide incremental cash revenues of $150,000, and incur incremental cash expenses of $100,000 annually. What is the payback period and accounting rate of return (ARR)?arrow_forwardPostman Company is considering two independent projects. One project involves a new product line, and the other involves the acquisition of forklifts for the Materials Handling Department. The projected annual operating revenues and expenses are as follows: Required: Compute the after-tax cash flows of each project. The tax rate is 40 percent and includes federal and state assessments.arrow_forward
- Roberts Company is considering an investment in equipment that is capable of producing more efficiently than the current technology. The outlay required is 2,293,200. The equipment is expected to last five years and will have no salvage value. The expected cash flows associated with the project are as follows: Required: 1. Compute the projects payback period. 2. Compute the projects accounting rate of return. 3. Compute the projects net present value, assuming a required rate of return of 10 percent. 4. Compute the projects internal rate of return.arrow_forwardA company is trying to estimate the first-year cash flow (at Year 1) for a proposed project. The financial staff has collected the following information on the project: Sales $16.5 million Optg costs (Excluding Depreciation) $12.8 million $2.8 million Depreciation Interest Expense $2.8 million The company has a 40% tax rate, and its WACC is 11%. What is the project's cash flow in year 1? Expressarrow_forward. Cols Communications is trying to estimate the first-year cash flow (at Year 1) for a proposed project. The financial staff has collected the following information on the project: Sales revenues $15 million Operating costs (excluding depreciation) 10.5 million Depreciation 3 million Interest expense 3 million The company has a 40% tax rate, and its WACC is 11%. What is the project’s cash flow for the first year (t = 1)? If the tax rate dropped to 30%, what is the project’s cash flow for the first year (t = 1)?arrow_forward
- eBook Colsen Communications is trying to estimate the first-year cash flow (at Year 1) for a proposed project. The assets required for the project were fully depreciated at the time of purchase. The financial staff has collected the following information on the project: Sales revenues $20 million Operating costs 18 million Interest expense 2 million The company has a 25% tax rate, and its WACC is 11%. Write out your answers completely. For example, 13 million should be entered as 13,000,000. What is the project's operating cash flow for the first year (t = 1)? Round your answer to the nearest dollar. 5 If this project would cannibalize other projects by $ 1.5 million of cash flow before taxes per year, how would this change your answer to part a? Round your answer to the nearest dollar. The firm's OCF would now be $.arrow_forwardeBook Colsen Communications is trying to estimate the first-year cash flow (at Year 1) for a proposed project. The assets required for the project were fully depreciated at the time of purchase. The financial staff has collected the following information on the project: $20 million Sales revenues Operating costs Interest expense 16 million 2 million The company has a 25% tax rate, and its WACC is 13%. Write out your answers completely. For example, 13 million should be entered as 13,000,000. a. What is the project's operating cash flow for the first year (t = 1)? Round your answer to the nearest dollar. b. If this project would cannibalize other projects by $1 million of cash flow before taxes per year, how would this change your answer to part a? Round your answer to the nearest dollar. The firm's OCF would now be $arrow_forwardQUESTION: Before evaluating the economic merits of a proposed investment, the XYZ Corporation insists that its engineers develop a cash-flow diagram of the proposal. An investment of $10,000 can be made that will produce uniform annual revenue of $5,310 for five years and then have a market (recovery) value of $2,000 at the end of year (EOY) five. Annual expenses will be $3,000 at the end of each year for operating and maintaining the project. Draw a cash-flow diagram for the five-year life of the project. Use the corporation's viewpoint.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Intermediate Financial Management (MindTap Course...FinanceISBN:9781337395083Author:Eugene F. Brigham, Phillip R. DavesPublisher:Cengage Learning
Principles of Accounting Volume 2AccountingISBN:9781947172609Author:OpenStaxPublisher:OpenStax College
Cornerstones of Cost Management (Cornerstones Ser...AccountingISBN:9781305970663Author:Don R. Hansen, Maryanne M. MowenPublisher:Cengage Learning
EBK CONTEMPORARY FINANCIAL MANAGEMENTFinanceISBN:9781337514835Author:MOYERPublisher:CENGAGE LEARNING - CONSIGNMENT
Managerial Accounting: The Cornerstone of Busines...AccountingISBN:9781337115773Author:Maryanne M. Mowen, Don R. Hansen, Dan L. HeitgerPublisher:Cengage Learning
Intermediate Financial Management (MindTap Course...
Finance
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Cengage Learning
Principles of Accounting Volume 2
Accounting
ISBN:9781947172609
Author:OpenStax
Publisher:OpenStax College
Cornerstones of Cost Management (Cornerstones Ser...
Accounting
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Cengage Learning
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:9781337514835
Author:MOYER
Publisher:CENGAGE LEARNING - CONSIGNMENT
Managerial Accounting: The Cornerstone of Busines...
Accounting
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Cengage Learning