1. (12 points) Nike Golf has decided to sell a new line of golf clube. The company has alrei spot $100.000 onwarchard development of this new prow. The club will all for per set $has T for a larketing suy that delenited Llue ALPELY will sell 60,000-XYZ sets per your for the next bu yer olarlin one year Lom How The fixed als esce you will be 39,300,000. The marketing stady alto determined that, if Nik: Golf practia with the new project, the cury will be cales of 10,000 sete per yesu u its high priceti clube starting ane your brow and for a log as the new line of clubs is being eeld). The high-primar cluta sellat S1,000 and has variable costs of 3820. Li Uruk w produce tle new clube, al equipment wlis 315,000,000 will breed be purchased way. Nice plans to Lontow Lluis om al 4% interes per year and Lully Tepuy the loan by the end of year Eve The CCA rate of the equipment is 20%.. Aku there is no other wet in the asset class. The salvage value of the equip.ears at the end of the project is zmo. The new line of clubs will nisa require an increase in net wyking capital of 31.400,000 tndny that will be returned at the end of the project The bax rate is 10 percent. The evel of capital va projects with cliparable risk is 13 175 percut APN with Durhly compounding) Moto: XYZ refers to the last time digits of your student namor. For exampic, ifth lucre of you acuden we are the one of swiv som er Dare 00:23-9,129. (a) (1 point, Whal is lle appropriate yearly discount rate that can be used to value blue project? Wher sourcing vuur St, leave 1 decimals ic.g., r = 0.0766 ur 7.86%) ih) ponts) Which of the cash flous listed above should not be treated as incremental cash flows when computing the NPV of the Nike Golf proje? Pxplain your answer. 12 pointa Colopute the present value of ttu tax cast. Huw Eron Kalix net uit cus& that are incremental sa the project. Id) (2 punts) Compute tbe present value of equipmeos investice and the punt value of investment in not working napital (e) (2 points) Compute the present value of CCA tax shield and the present value of tax recapture terminale, if any ll pins) What is the project's NPVI Sudd the company icmpt or reject this projet (8) 12 points) If, at the end of the project life, thu tc wvali s tlu equipment for tlu price of $16.000.000, what would be the tax implications 4 of 4 1. (12 points) Nike Golf has decided to sell a new line of golf clube. The company has alrei spot $100.000 onwarchard development of this new prow. The club will all for per set $has T for a larketing suy that delenited Llue ALPELY will sell 60,000-XYZ sets per your for the next bu yer olarlin one year Lom How The fixed als esce you will be 39,300,000. The marketing stady alto determined that, if Nik: Golf practia with the new project, the cury will be cales of 10,000 sete per yesu u its high priceti clube starting ane your brow and for a log as the new line of clubs is being eeld). The high-primar cluta sellat S1,000 and has variable costs of 3820. Li Uruk w produce tle new clube, al equipment wlis 315,000,000 will breed be purchased way. Nice plans to Lontow Lluis om al 4% interes per year and Lully Tepuy the loan by the end of year Eve The CCA rate of the equipment is 20%.. Aku there is no other wet in the asset class. The salvage value of the equip.ears at the end of the project is zmo. The new line of clubs will nisa require an increase in net wyking capital of 31.400,000 tndny that will be returned at the end of the project The bax rate is 10 percent. The evel of capital va projects with cliparable risk is 13 175 percut APN with Durhly compounding) Moto: XYZ refers to the last time digits of your student namor. For exampic, ifth lucre of you acuden we are the one of swiv som er Dare 00:23-9,129. (a) (1 point, Whal is lle appropriate yearly discount rate that can be used to value blue project? Wher sourcing vuur St, leave 1 decimals ic.g., r = 0.0766 ur 7.86%) ih) ponts) Which of the cash flous listed above should not be treated as incremental cash flows when computing the NPV of the Nike Golf proje? Pxplain your answer. 12 pointa Colopute the present value of ttu tax cast. Huw Eron Kalix net uit cus& that are incremental sa the project. Id) (2 punts) Compute tbe present value of equipmeos investice and the punt value of investment in not working napital (e) (2 points) Compute the present value of CCA tax shield and the present value of tax recapture terminale, if any ll pins) What is the project's NPVI Sudd the company icmpt or reject this projet (8) 12 points) If, at the end of the project life, thu tc wvali s tlu equipment for tlu price of $16.000.000, what would be the tax implications 4 of 4
