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1. Fairfax Paint operates stores in Virginia. The firm is evaluating the Vienna project, which would involve opening a new store in Vienna. During year 1, Fairfax Paint would have total revenue of 319,000 dollars and total costs of 283,000 dollars if it pursues the Vienna project, and the firm would have total revenue of 260,000 dollars and total costs of 234,000 if it does not pursue the Vienna project. Depreciation taken by the firm would be 92,000 dollars if the firm pursues the project and 64,000 dollars if the firm does not pursue the project. The tax rate is 45 percent. What is the relevant operating cash flow (OCF) for year 1 of the Vienna project that Fairfax Paint should use in its NPV analysis of the Vienna project? (JUST NEED THE ANSWER)

2. Middlefield Motors is evaluating project A, which would require the purchase of a piece of equipment for 377,000 dollars. During year 1, project A is expected to have relevant revenue of 186,000 dollars, relevant costs of 68,000 dollars, and some depreciation. Middlefield Motors would need to borrow 377,000 dollars for the equipment and would need to make an interest payment of 18,850 dollars to the bank in year 1. Relevant net income for project A in year 1 is expected to be 21,000 dollars and operating cash flows for project A in year 1 are expected to be 109,000 dollars. Straight-line depreciation would be used. What is the tax rate expected to be in year 1? Answer as a rate in decimal format so that 12.34% would be entered as .1234 and 0.98% would be entered as .0098. (JUST NEED THE ANSWER)

Financial Management, Finance

  • Category:- Financial Management
  • Reference No.:- M92719873

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