Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Basic Finance Expert

1. (Answer in Excel) Calculating Nominal Cash Flow: Etonic Inc. is considering an investment of $365,000 in an asset with an economic life of five years. The firm estimates that the nominal annual cash revenues and expenses at the end of the first year will be $245,000 and $70,000, respectively. Both revenues and expenses will grow thereafter at the annual inflation rate of 3 percent. Etonic will used the straight-line method to depreciate its asset to zero over five years. The salvage value of the asset is estimated to be $45,000 in nominal terms at that time. The one-time net working capital investment of $10,000 is required immediately and will be recovered at the end of the project. All corporate cash flows are subject to a 34 percent tax rate.
a. What is the project's total nominal cash flow from assets for each year?

2. Calculating NPV and IRR for a Replacement: A firm is considering an investment in a new machine with a price of $18 million to replace its existing machines. The current machine has a book value of $6 million and a market value of $4.5 million. The new machine is expected to have a four-year life, and the old machine has four years left in which it can be used. If the firm replaces the old machine with the new machine, it expects to save $6.7 million in operating costs each year over the next four years. Both machines will have no salvage value in four years. If the firm purchases the new machine, it will also need an investment of $250,000 in net working capital. The required return on the investment is 10 percent, and the tax rate is 30 percent. What are the NPV and IRR of the decision to replace the old machine?

3. Project Analysis and Inflation: Sanders Enterprises, Inc. has been considering the purchase of a new manufacturing facility for $270,000. The Facility is to be fully depreciated on a straight-line basis over seven years. It is expected to have no resale value after the even years. Operating revenues from the facility are expected to be $105,000, in nominal terms, at the end of the first year. The revenues are expected to increase at the inflation rate of 5 percent. Production costs at the end of the first year will be $30,000, in nominal terms, and they are expected to increase at 6 percent per year. The real discount rate is 8 percent. The corporate tax rate is 34 percent. Sanders have other profitable operations.
a. Should the company accept the project? describe.

 

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M925037

Have any Question? 


Related Questions in Basic Finance

1 money market investments what steps should you take to

1. Money Market Investments. What steps should you take to determine the best allocation of your money market investments? What factors should you consider in determining your allocation? 2. Liquidity During a Weak Econo ...

The rex-lint inc is planning to put a manufacturing

The Rex-Lint Inc. is planning to put a manufacturing facility in place to build widgets. The systematic risk of this project alone is 25% greater than they currently manage. The company has a target debt to value ratio o ...

A uk-based multinational company has sold an overseas

A UK-based multinational company has sold an overseas chemical plant, the price for the plant being determined by an earn-out agreement. The amount of the receipt under the agreement is likely to be $10m, with a maximum ...

1 what are the general requirements regarding income

1. What are the general requirements regarding income, investments, and dividends with which a REIT must comply to maintain its tax-exempt status? 2. What are the three principal types of REITs? 3. What is a mortgage REI ...

1 what are the trade-offs among the three alternative loan

1. What are the trade-offs among the three alternative loan maturities? 2. Based on the information on finance payments that you retrieved from the loan payment Web site, advise the Sampsons on the best loan maturity for ...

In april 2010 christina romer who was then serving as chair

In April 2010, Christina Romer, who was then serving as chair of the President's Council of Economic Advisers, argued: "The overwhelming weight of the evidence is that the current very high-and very disturbing-levels of ...

A supplier is offering your firm a cash discount of 2

A supplier is offering your firm a cash discount of 2 percent if purchases are paid for within ten days; otherwise, the bill is due at the end of sixty days. Would you recommend borrowing from a bank at an 18 percent ann ...

The cost of capital weighted average cost of capitalthe

The Cost of Capital: Weighted Average Cost of Capital The firm's target capital structure is the mix of debt, preferred stock, and common equity the firm plans to raise funds for its future projects. The target proportio ...

Using financial data from an appropriate source eg yahoo

Using financial data from an appropriate source (e.g. Yahoo Finance, Google Finance, annual reports, etc.), calculate the operating and cash conversion cycles for Darden Restaurants (ticker DRI). Explain what your answer ...

Florence transferred 300000 to an irrevocable trust for her

Florence transferred $300,000 to an irrevocable trust for her two children. She granted them a noncumulative right to withdraw the greater of $5,000 or 5% of trust assets each year. Her children did not make any withdraw ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

WalMart Identification of theory and critical discussion

Drawing on the prescribed text and/or relevant academic literature, produce a paper which discusses the nature of group

Section onea in an atwood machine suppose two objects of

SECTION ONE (a) In an Atwood Machine, suppose two objects of unequal mass are hung vertically over a frictionless

Part 1you work in hr for a company that operates a factory

Part 1: You work in HR for a company that operates a factory manufacturing fiberglass. There are several hundred empl

Details on advanced accounting paperthis paper is intended

DETAILS ON ADVANCED ACCOUNTING PAPER This paper is intended for students to apply the theoretical knowledge around ac

Create a provider database and related reports and queries

Create a provider database and related reports and queries to capture contact information for potential PC component pro