1.)Relevant Cash Flows- Kenny, Inc. is looking at setting up a new manufacturing plant in South Park. The company bought some land six years ago for $7.5 million in anticipation of using it as a warehouse and distribution site, but the company has since decided to rent facilities elsewhere. The land would net $10.3 million if it were sold today. The company now wants to build its new manufacturing plant on this land; the plant will cost $24 million to build, and the site requires $975,000 worth of grading before it is suitable for construction. What is the proper cash flow amount to use as the initial investment in fixed assets when evaluating this project? Why? Show calculations.

2.) Relevant Cash Flows

Winnebagel Corp. currently sells 28,000 motor homes per year at $73,000 each and 7,000 luxury motor coaches per year at $115,000 each. The company wants to introduce a new portable camper to fill out its product line; it hopes to sell 29,000 of these campers per year at $18,500 each. An independent consultant has determined that if Winnebagel introduces the new campers, it should boost the sales of its existing motor homes by 2,500 units per year and reduce the sales of its motor coaches by 750 units per year. What is the amount to use as the annual sales figure when evaluating this project? Why? Show work.

3.) Calculating Projected Net Income-

A proposed new investment has projected sales of $750,000. Variable costs are 55 percent of sales, and fixed costs are $182,500 depreciation is $86,000. Prepare a pro forma income statement assuming a tax rate of 35 percent. What is the projected net income? Show Calculations.

8.) Calculating Project OCF

Rolston Music Company is considering the sale of a new sound board use in recording studios. The new board would sell for $26,400, and the company expects to sell 1,500 per year. The company currently sells 1,850 units of its existing model per year. If the new model is introduced, sales of the existing model will fall to 1,520 units per year. The old board retails for $22,300. Variable costs are 55 percent of sales, depreciation on the equipment to produce the new board will be $1,975,000 per year, and fixed costs are $2,400,000 per year. If the tax rate is 38 percent, what is the annual OCF for the project?

10.) Calculating Project NPV-

In the previous problem, suppose the required return on the project is 14 percent. What is the projects NPV? Show Calculations.

14.) Project Evaluation-

Your firm is contemplating the purchase of a new $480,000 computer-based order entry system. The system will be depreciated straight-line to zero over its five-year life. It will be worth $30,000 at the end of that time. You will save $145,000 before taxes per year in order processing costs, and you will be able to reduce working capital by $35,000 at the beginning of the project, Working capital will revert back to normal at the end of the project. If the tax rate is 35 percent. What is the IRR for this project? Show work.

15.) Project Evaluation

In the previous problem, suppose your required return on the project is 10 percent and your pretax cost savings are $155,000 per year. Will you accept the project? What if the pretax cost savings are only $125,000 per year? Show work.

16.) Scenario Analysis

Automatic Transmissions, Inc. has the following estimates for its new gear assembly project: price = $860 per unit; variable cost = $320 per unit; fixed cost - $3.4 million; quantity 60,000 units. Suppose the company believes all of its estimates are accurate only to within = 15 percent. What values should the company use for the four variables given here when it performs its best-case scenario analysis? What about the worse-case scenario?