14. What is the expected payback period for the new machine? (2 decimal places) 15. What is the profitability index of the proposed machine if V Co. uses a discount rate of 14%% on projects of this type (Round off present value factor to 3 decimal places) _ (2 decimal places) Case 10 Z Co. is considering an investment in a machine that would reduce annual labor costs by P30,000. The machine has an expected life of 10 years with no residual value. The machine would be depreciated according to the straight line method over its useful life. The company's marginal tax rate is 30%%. Assume that the company will invest in the machine if it generates a pre-tax internal rate of retum of 10% 16. What is the maximum amount the company can pay for the machine and still meet the internal rate of return criterion? (Round off present value factor to 3 decimal places) (Round off to nearest peso) Case 11 Shell Company has the following investment portfolio: Expected return Investment Beta Investment A 15% P100,000 1.2 Investment B 10%% P300,000 -0.5 Investment C 8% F200,000 1.5 Investment D P100,000 -1.0 17. What is the expected retum of the portfolio? (Round off to 2 decimal places) Case 12 Assume that May Industries is considering investing in a project with the following characteristics: Initial investment P500,000 Additional investment in working capital 10,000 Cash flow before income taxes for years 1 through 5 140,000 Yearly tax depreciation 90,000 Terminal value of investment 50,000 Cost of capital 10% Marginal tax rate 30% Investment life 5 years Assume that all cash flows come at the end of the year. (Round off present value to 3 decimal places) 18. What is the amount of the after-tax cash flows in year 2? 10. What is the net present value of the investment? Case 13 Y Co. recently sold a used machine for P40,000. The machine had a book value of F80,000 at the time of the sale. 20. What is the after tax cash flow from the sale, assuming the company's marginal tax rate is 20%%? Case 14 W Corp. faces a marginal tax rate of 35% One project which is currently under evaluation has a cash flow in the fourth year of its life that has a present value of P10,000(after-tax). W Corp. assumes that all cash flows occur at the end of the year and the company uses 11%% as its discount rate. 21. What is the pretax amount of the cash flow in year 4? (Round PVF to 3 decimal places). (Round off to the nearest peso)Case 15 T Company is considering acquiring a machine in order to reduce its direct labor costs. The machine shall last for 4 years with no residual value. Currently, the cash expenses amounted to P120,000 per year. The initial analysis indicated that the time-adjusted rate of return is 15%% At 12%% (cost of capital to finance the purchase of the machine), the company expects a net present value of P5,470,000. (Round PVF to 3 decimal places) 22. Ignoring income tax considerations, the profitability index is Round off to 2 decimal places) Case 16 A firm, with an 18% cost of capital, is considering the following projects (on January 1.201 1): Jan 1,2011, Cash outflow December 31,2015, Cash inflow Project internal rate of return Project A P3.500,000 P7 400,000 15%% Project B P4.000,000 P9.050,000 Round off PVF to 3 decimal places 23. Project B's internal rate of return is closest to (Round off to 2 decimal places e.g. 32% or 0.32) Case 17 Julie Company purchased a F200,000 machine that has a four-year life and no residual value. The company uses straight-line depreciation on all asset acquisitions and is subject to a 30% tax rate. 24. The proper cash flow to show in a discounted-cash-flow analysis as occurring at time 0 would be: Case 18 Eric makes an investment at a rate of 12%%, compounded annually, on January 1,2010. On December 31,2013, the value of C's investment is P15,000. 25. How much interest did Eric eam on this investment over the four year period? Round off PVF to 3 decimal places _(Round to nearest peso)Case 9 V Co. is considering an investment in a new cheese-cutting machine to replace its existing cheese cutter. Information on the existing machine and the replacement machine follow: Cost of the new machine P40,000 Net annual savings in operating costs 9,000 Residual value now of the old machine 6,000 Residual value of the old machine in 8 years 0 Residual value of the new machine in 8 years 5,000 Estimated life of the new machine 8 years