Question: Java Cafes tax rate is 45 percent and the appropriate discount rate is 8 percent. It is considering another project. Each asset class consists only

Java Cafe’s tax rate is 45 percent and the appropriate discount rate is 8 percent. It is considering another project. Each asset class consists only of the project asset and will be terminated at the end of the project. Java Cafe is not capital constrained. The initial investment is $90,000; annual pre-tax operating cash flow is $20,000; salvage value is $50,000; the CCA rate is 30 percent; and the length of the project is five years. Should Java Cafe take this project?

Step by Step Solution

★★★★★

3.40 Rating (175 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock

As the asset classes will be terminated when the project ends we have to consider the treatment of t... View full answer

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Document Format (1 attachment)

413-B-A-I (5021).docx

120 KBs Word File

Students Have Also Explored These Related Accounting Questions!

KRZ Companys tax rate is 40 percent and the appropriate discount rate is 10 percent. It is considering a project. Each asset class is large and continues after the project terminates. KRZ is not...

If expected dividends grow at 8% and the appropriate discount rate is 12%, what is the value of a stock with an expected dividend of $3.49?

10. Financial Break-Even Niko has purchased a brand new machine to produ its High Flight line of shoes. The machine has an economic life of five The depreciation schedule for the machine is...

[PartA] ZRK Company's tax rate is 40 percent and the appropriate discount rate (after-tax) is 15 percent. It is considering a project. Each asset class is large and continues (i.e. open) after the...

Required Use the basic data in the case to put together an analysis similar to Table 12-11 in the text. To determine earnings before depreciation and taxes (EBDT), subtract projected operating...

37. (LO 14,2) KRZ Company's tax rate is 40 percent and the appropriate discount rate is 10 percent. It is considering a project. Each asset class is large and continues after the project terminates....

A division ot Sunland City Highlands Manufacturing is considering purchasing a machine for $1,680,000 that automates the process of inserting electronic components onto computer motherboards. The...

ZRK Company's tax rate is 40 percent and the appropriate discount rate (after-tax) is 15 percent. It is considering a project. Each asset class is large and continues (i.e. open) after the project...

Down Under Boomerang, Inc., is considering a new 6-year project that requires an initial investment in a fixed asset of $5.076 million. The fixed asset will be depreciated straight-line to zero over...

During 2010 Doubleday Company converted $1,700,000 of its total $2,000,000 of bonds payable into common stock. Indicate how the transaction would be reported on a statement of cash flows, if at all.

In Figure, a beam of unpolarized light, with intensity 43 W/m2, is sent into a system of two polarizing sheets with polarizing directions at angles 1 =70? and 2 = 90? to the y axis. What is the...

A company manufactures and sells a product for $ 1 2 5 per unit. The company's fixed costs are $ 7 0 , 2 6 0 , and its variable costs are $ 9 5 per unit. The company's break - even point in units is:

Design an acceptance sampling plan for which AQL is 0.10, RQL is 0.05, is 0.05, and is 0.05.

What real options have you been given over the past year and how valuable were they? What factors do you think influenced your valuation of them?

Explain how to create a risk-free portfolio from the stock and the option's payoff.

What is a hedge ratio?

and why? Thanks! 5.2 Risk and Risk Premiums Which portfolio is more risky? Spreadsheet 5.1 2 Scenario analysis for the stock market Column 8 x Deviation from Column B x Squared Deviation 110.45...

Question 1: Willey Co. wants to calculate its WACC with the following information: -The companys long-term bonds currently offer a yield to maturity of 8% -The companys stock price is $32 per share...

Answer all parts I will upvote!! NPV and IRR Benson Designs has prepared the following estimates for a long-term project it is considering. The initial investment is $25,060, and the project is...