Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Financial Accounting Expert

Task1. Scenario analysis Your firm, Agrico Products, is considering a tractor which would have a cost of $36,000, would raise pre-tax operating cash flows before taking account of depreciation by $12,000 per year, and would be depreciated on the straight-line basis to zero over five years at the rate of $7,200 per year, starting the first year. (Thus, annual cash flows would be $12,000 before taxes plus the tax savings which result from $7,200 of depreciation.) The managers are having a heated debate about whether the tractor would actually last five years. The controller persists that she knows of tractors which have lasted only four years. The treasurer agrees with the controller, but he argues that most tractors actually do give five years of service. The service manager then states that some last for as long as eight years. Given this discussion, the CFO asks you to make a scenario analysis to find out the significance of the tractor's life on the NPV. Use a 40% marginal federal-plus-state tax rate, a zero salvage value, and a 8% WACC. Supposing each of the indicated lives has the same probability of occurring (probability = 1/3), what is the tractor's expected NPV? (Hint: Use the 5-year straight-line depreciation for all analyses and ignore the MACRS half-year convention for this problem.)

A. Tractor's NPV when actual life is 5 years?

B. Tractor's NPV when actual life is 4 years?

C. Tractor's NPV when actual life is 8 years?

D. Tractor's expected NPV?

Financial Accounting, Accounting

  • Category:- Financial Accounting
  • Reference No.:- M93951

Have any Question? 


Related Questions in Financial Accounting

Assignmentjohns house painting company has the following

Assignment John's House Painting Company has the following transactions for the year 1. December 1 - Issued capital stock for $100,000 to start a house painting business. 2. December 1 - Paid one year insurance premium c ...

Question 1 an advantage of the corporate form of business

Question 1. An advantage of the corporate form of business is _____. it is simple to establish the corporate tax rate is less than the personal tax rate corporations must pay dividends the shareholders are not responsibl ...

Assignmentable company issued 690000 of 7 percent first

Assignment Able Company issued $690,000 of 7 percent first mortgage bonds on January 1, 20X1, at 103. The bonds mature in 20 years and pay interest semiannually on January 1 and July 1. Prime Corporation purchased $460,0 ...

Accounting and financial management assignment-this

Accounting and Financial Management Assignment- This assignment is designed to give you an opportunity: apply management accounting concepts and finance frameworks...to increase the effectiveness of management decision m ...

Mr great kid an experienced budget analyst at toysforall

Mr. "Great" Kid, an experienced budget analyst at ToysForAll Manufacturing company, has been charged with assessing the firm's financial performance during 2014 and its financial position at year end 2014. To complete th ...

Assignmentpart one working capital analysiscapers inc has

Assignment Part One: Working Capital Analysis Capers, Inc. has just promoted you to Chief financial officer. Since this is a new office in the company, you are understaffed and many of the responsibilities have been assi ...

Todays workforce is increasingly made up of part-time or

Today's workforce is increasingly made up of part-time or contingent employees. Is organizational culture important if the workforce is comprised of mostly temporaries

Assignment non florida fte case problemin the state of xxx

Assignment: Non Florida FTE Case Problem In the State of XXX, funding of public education is handled through a Foundation program. The state funds a student at a weighted FTE value of $3,150. Based on a local school dist ...

Assignmentscenarioyou are a first year staff person working

Assignment Scenario You are a first year staff person working with a multidiscipline team to report on a potential company your firm is considering to invest in. The president of your company will review your team's writ ...

Choose one of the following two assignments to complete

Choose one of the following two assignments to complete this week. Do not do both assignments. Identify your assignment choice in the title of your submission. Option #1: Income Statement, Retained Earnings, and Balance ...

  • 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

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

Describe what you learned about the impact of economic

Describe what you learned about the impact of economic, social, and demographic trends affecting the US labor environmen