Corporate Finance
12th Edition
ISBN: 9781259918940
Author: Ross, Stephen A.
Publisher: Mcgraw-hill Education,
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Question
Chapter 6, Problem 35QAP
a.
Summary Introduction
Adequate information:
Salvage value = $150,000
Cost of equipment (C) = $2,100,000
Fixed cost (FC) = $650,000
Net working capital (NWC) = $325,000
Price per unit = $20
Variable cost per unit (V) = $9.45
Useful life of equipment = 5 years
Sales units (Q) = 145,000
Tax rate (T) = 21% or 0.21
Required
To compute:
- The
net present value (NPV) of the project. - The net present value (NPV) of the project, if the bid price has been changed.
- The net present value (NPV) of the project, if the number of cartons sold changes.
- The net present value (NPV) of the project, if the cost of the cartons changes.
Introduction: Net present value is defined as the summation of the present value of
b.
Summary Introduction
Adequate information:
Salvage value = $150,000
Cost of equipment (C) = $2,100,000
Fixed cost (FC) = $650,000
Net working capital (NWC) = $325,000
Price per unit = $20
Variable cost per unit (V) = $9.45
Useful life of equipment = 5 years
Tax rate (T) = 21% or 0.21
Required rate of return (r) = 11% or 0.11
To compute: The quantity of cartons per year if it is a breakeven scenario
Introduction: The decision criteria of net present value are that in the case of a single project, if the net present value of the project is zero or positive, the project should be accepted, otherwise rejected.
c.
Summary Introduction
Adequate information:
Salvage value = $150,000
Cost of equipment (C) = $2,100,000
Net working capital (NWC) = $325,000
Price per unit = $20
Variable cost per unit (V) = $9.45
Useful life of equipment = 5 years
Sales units (Q) = 145,000
Tax rate (T) = 21% or 0.21
Required rate of return (r) = 11% or 0.11
To compute: Fixed costs
Introduction: Total fixed costs do not change with the change in activity base or unit. In the other words, it remains the same at all levels of production. For instance, rent, interest on loans, depreciation, and so on. These costs have to be paid whether production occurs or not.
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Students have asked these similar questions
The following payoff table shows profit for a decision analysis problem with two decision alternatives and three states of nature:
State of Nature
Decision Alternative
S1
S2
S3
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200
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150
d2
250
150
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(a)
What is the optimal decision strategy if perfect information were available?
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S2
:
S3
:
(b)
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(c)
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(d)
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Chapter 6 Solutions
Corporate Finance
Ch. 6 - Opportunity Cost In the context of capital...Ch. 6 - Prob. 2CQCh. 6 - Incremental Cash Flows Your company currently...Ch. 6 - Depreciation Given the choice, would a firm prefer...Ch. 6 - Prob. 5CQCh. 6 - Prob. 6CQCh. 6 - Equivalent Annual Cost When is EAC analysis...Ch. 6 - Prob. 8CQCh. 6 - Capital Budgeting Considerations A major college...Ch. 6 - To answer the next three questions, refer to the...
Ch. 6 - Prob. 11CQCh. 6 - To answer the next three questions, refer to the...Ch. 6 - Prob. 1QAPCh. 6 - Prob. 2QAPCh. 6 - Calculating Project NPV Down Under Boomerang,...Ch. 6 - Calculating Project Cash Flow from Assets In the...Ch. 6 - Prob. 5QAPCh. 6 - NPV and Bonus Depreciation In the previous...Ch. 6 - Prob. 7QAPCh. 6 - Prob. 8QAPCh. 6 - NPV and Bonus Depreciation In the previous...Ch. 6 - Calculating Salvage Value An asset used in a...Ch. 6 - Calculating NPV Thurston Petroleum is considering...Ch. 6 - Prob. 12QAPCh. 6 - Cost-Cutting Proposals Starset Machine Shop is...Ch. 6 - NPV and Bonus Depreciation In the previous...Ch. 6 - Prob. 15QAPCh. 6 - Prob. 16QAPCh. 6 - NPV and Bonus Depreciation Eggz, Inc., is...Ch. 6 - Prob. 18QAPCh. 6 - Prob. 19QAPCh. 6 - Prob. 20QAPCh. 6 - Prob. 21QAPCh. 6 - Prob. 22QAPCh. 6 - Prob. 23QAPCh. 6 - Prob. 24QAPCh. 6 - Prob. 25QAPCh. 6 - Prob. 26QAPCh. 6 - Prob. 27QAPCh. 6 - Prob. 28QAPCh. 6 - Prob. 29QAPCh. 6 - Prob. 30QAPCh. 6 - Prob. 31QAPCh. 6 - Prob. 32QAPCh. 6 - Prob. 33QAPCh. 6 - Prob. 34QAPCh. 6 - Prob. 35QAPCh. 6 - Prob. 36QAPCh. 6 - Prob. 37QAPCh. 6 - Prob. 38QAPCh. 6 - Prob. 39QAPCh. 6 - Prob. 40QAPCh. 6 - Prob. 41QAPCh. 6 - Prob. 42QAPCh. 6 - Prob. 1MCCh. 6 - GOODWEEK TIRES, INC. After extensive research and...
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