Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

(10) Please explain this through inputs on a business calculator (CF0, F01, etc.) Ruby is considering opening a new business for a long-term care facility.

image text in transcribed

(10) Please explain this through inputs on a business calculator (CF0, F01, etc.)

Ruby is considering opening a new business for a long-term care facility. The initial investment for the business is $650,000, which includes constructing the housing unit and purchasing other assets. For tax purposes, the projected salvage value of all the assets is $58,000. The government requires depreciating the assets using the straight-line method over the business's life of 15 years. Ruby is trying to estimate the net cashflows after tax for this business. She has already figured out that the business will generate an annual after-tax cash inflow of $85,000 from the operation. She now needs your help to estimate the net cash inflow that she will receive from selling the facility's assets at the end of 15 years. Ruby's required return is 8%. Required: (1) Ruby estimates that, if the economic is booming at the end of the 15 years, she can sell the assets for $96,000. Assuming the tax rate of 30%, what is the net after-tax cashflow Ruby will receive from selling her assets at the end of 15 years? (Please round your answer to the nearest dollar.) \$ (2) If Ruby is able to sell her assets for $96,000, as mentioned in (1) above, what is the Internal Rate of Return (IRR) for Ruby's business? (Please round your answer to two decimal points, i.e., XX.XX\%) \% (3) Ruby estimates that, if the economy is in recess at the end of the 15 years, she can sell the assets for $28,000. Assuming the tax rate of 30%, what is the net after-tax cashflow Ruby will receive from selling her assets at the end of 15 years? (Please round your answer to the nearest dollar.) \$ (4) If Ruby is able to sell her assets for $28,000, as mentioned in (3) above, what is the Net Present Value (NPV) for Ruby's business? (Please round your answer to two decimal points) \$

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Accounting What the Numbers Mean

Authors: David H. Marshall, Wayne W. McManus, Daniel F. Viele

10th edition

9780077515904, 007802529X, 77515900, 978-0078025297

More Books

Students also viewed these Accounting questions

Question

=+d) What sampling method is used?

Answered: 1 week ago

Question

(7) How are you measuring progress and benefits?

Answered: 1 week ago

Question

(5) How does it help you make decisions about resources and budget?

Answered: 1 week ago