Question
1) i. A company has new equipment costs of $1 million, which will be depreciated to zero using straight-line depreciation over 7 years. The company
1)
i. A company has new equipment costs of $1 million, which will be depreciated to zero using straight-line depreciation over 7 years. The company expects to bring in revenues of $8 million per year for 7 years with production costs of $1 million per year. If the company's tax rate is 41%, what are the incrementalearnings(not cash flows) of this project in years 1-7? Enter your answer in dollars and round to the nearest dollar.
ii.) You are considering adding a new division into your existing firm. This will entail an increase in inventory of $8303, an increase in accounts payables of $2100, and an increase in property, plant, and equipment of $40,000. All other accounts will remain unchanged. The change in net working capital resulting from the addition of the new division is _______________. Enter your answer in dollars and round to the nearest dollar.
iii) Company XYZ, an all-equity firm, reported incremental revenues (net income) of $378 million for the most recent year. The firm had depreciation expenses of $142 million and capital expenditures of $163 million. The company also had an increase in net working capital of $20 million. What is the free cash flow? Enter your answer in dollars and round to the nearest dollar.
iv MACRSYear 1Year 2Year 3Year 4Year 5Year 6
Depreciation Rate 20%32%19.2%11.52%11.52%5.76%
A company invests $26644 in new machinery, which was depreciated using the five-year MACRS schedule shown above. If the company sold the machinery immediately after the end of year 3 for $9378, what is the after-tax salvage value from the sale, given a tax rate of 21%?Enter your answer in dollars and round to the nearest dollar.
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