1)Mideque, Inc., is considering a project to produce pens. It is estimated that the initial cost of the equipment, including transportation, installation, and so forth, will be $24,000. Mideque also estimates that the revenues (sales) each year over the five-year life of the project will be $15,000. The other yearly expenses (e.g., cost of goods sold, wages and salaries, etc.), will be $7,000. Mideque will finance $9,000 by loan with an interest rate of 15 percent per year. The loan will be repaid at the rate of $2000 per year plus interest on the remaining balance each year. Mideque uses straight-line depreciation, and the equipment will have no salvage value at the end of its life. Assume a corporate-profits tax rate of 50 percent. Obtain the initial investment.

24,000

15,000

9,000

33,600

2) Mideque, Inc., is considering a project to produce pens. It is estimated that the initial cost of the equipment, including transportation, installation, and so forth, will be $24,000. Mideque also estimates that the revenues (sales) each year over the five-year life of the project will be $15,000. The other yearly expenses (e.g., cost of goods sold, wages and salaries, etc.), will be $7,000. Mideque will finance $9,000 by loan with an interest rate of 15 percent per year. The loan will be repaid at the rate of $2000 per year plus interest on the remaining balance each year. Mideque uses straight-line depreciation, and the equipment will have no salvage value at the end of its life. Assume a corporate-profits tax rate of 50 percent. Obtain the annual cash flow.

9,000

6,400

7,200

5,600

3) Mideque, Inc., is considering a project to produce pens. It is estimated that the initial cost of the equipment, including transportation, installation, and so forth, will be $24,000. Mideque also estimates that the revenues (sales) each year over the five-year life of the project will be $15,000. The other yearly expenses (e.g., cost of goods sold, wages and salaries, etc.), will be $7,000. Mideque will finance $9,000 by loan with an interest rate of 15 percent per year. The loan will be repaid at the rate of $2000 per year plus interest on the remaining balance each year. Mideque uses straight-line depreciation, and at the end of the life of this project the equipment can be sold for $4,000. Assume a corporate-profits tax rate of 50 percent.

Assume that the working capital requirement will be $1,000 and that the IRS allows an investment tax credit of 8 percent for this kind of project. Compute the initial investment.

23,080

20,000

4,080

5,000

4) Mideque, Inc., is considering a project to produce pens. It is estimated that the initial cost of the equipment, including transportation, installation, and so forth, will be $24,000. Mideque also estimates that the revenues (sales) each year over the five-year life of the project will be $15,000. The other yearly expenses (e.g., cost of goods sold, wages and salaries, etc.), will be $7,000. Mideque will finance $9,000 by loan with an interest rate of 15 percent per year. The loan will be repaid at the rate of $2000 per year plus interest on the remaining balance each year. Mideque uses straight-line depreciation, and at the end of the life of this project the equipment can be sold for $4,000. Assume a corporate-profits tax rate of 50 percent. Assume that the working capital requirement will be $1,000 and that the IRS allows an investment tax credit of 8 percent for this kind of project. Obtain the annual cash flow of the last period.

6,400

6,000

11,000

5,400

5-) Mideque, Inc., is considering a project to produce pens. Assume that this is a replacement project. The old equipment can be sold for $10,000 as of today. It was bought five years ago for $22,000 and is assumed to last for five more years with no salvage value at the end of its life. The initial cost of the new equipment, including transportation, installation, and so forth, will be $ 24,000. Mideque also estimates that this new equipment will save the company $3,000 per year in operating costs and increase the revenues (sales) by $1,000 per year over the five-year life of the project. Mideque will finance $9,000 by loan with an interest rate of 15 percent per year. The loan will be repaid at the rate of $2000 per year plus interest on the remaining balance each year. Mideque uses straight-line depreciation, and the new equipment will have no salvage value at the end of its 5-year life. Assume a corporate-profits tax rate of 50 percent a capital-gain tax rate of 40 percent. Compute the initial investment.

24,000

13,600

9,000

33,600

6-) Mideque, Inc., is considering a project to produce pens. Assume that this is a replacement project. The old equipment can be sold for $10,000 as of today. It was bought five years ago for $22,000 and is assumed to last for five more years with no salvage value at the end of its life. The initial cost of the new equipment, including transportation, installation, and so forth, is estimated to be $ 24,000. Mideque also estimates that this new equipment will save the company $3,000 per year in operating costs and increase the revenues (sales) by $1,000 per year over the five-year life of the project. Mideque will finance $9,000 by loan with an interest rate of 15 percent per year. The loan will be repaid at the rate of $2000 per year plus interest on the remaining balance each year. Mideque uses straight-line depreciation, and the new equipment will have no salvage value at the end of its 5-year life. Assume a corporate-profits tax rate of 50 percent a capital-gain tax rate of 40 percent. Also, assume that the working capital requirement will be $1,000. Obtain the annual cash inflow of the last period.

4,300

3,300

6,000

11,000