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( 2 3 ) TexMex Food Company is considering a new salsa whose data are shown below. Under the new tax law, the equipment to
TexMex Food Company is considering a new salsa whose data are shown below. Under the new tax law, the equipment to be used in the project is eligible for bonus depreciation, so it will be fully depreciated at t At the end of the projects life, the equipment would have zero salvage value, and no change in net operating working capital NOWC would be required for the project. Revenues and operating costs are expected to be constant over the project's year life. However, this project would compete with other TexMex products and would reduce their pretax annual cash flows. What is the project's NPVHint: Cash flows are constant in Years Do not round the intermediate calculations and round the final answer to the nearest whole number.
WACC
Pretax cash flow reduction for other products cannibalization $
Equipment cost $
Annual sales revenues $
Annual operating costs $
Tax rate
a$
b$
c$
d$
e$
Temple Corp. is considering a new project whose data are shown below. The equipment that would be used has a year tax life. Under the new tax law, the equipment used in the project is eligible for bonus depreciation, so it will be fully depreciated at t The equipment would have a zero salvage value at the end of the projects life. No change in net operating working capital NOWC would be required. Revenues and operating costs are expected to be constant over the project's year life. What is the project's NPV Do not round the intermediate calculations and round the final answer to the nearest whole number.
Riskadjusted WACC
Equipment cost $
Sales revenues, each year $
Annual operating costs $
Tax rate
a $
b $
c $
d $
e $
Assume that you have been hired as a consultant by CGT a major producer of chemicals and plastics, including plastic grocery bags, styrofoam cups, and fertilizers, to estimate the firm's weighted average cost of capital. The balance sheet and some other information are provided below.
Assets
Current assets $
Net plant, property, and equipment $
Total assets $
Liabilities and Equity
Accounts payable $
Accruals $
Current liabilities $
Longterm debt bonds, $ par value $
Total liabilities $
Common stock shares $
Retained earnings $
Total shareholders' equity $
Total liabilities and shareholders' equity $
The stock is currently selling for $ per share, and its noncallable $ par value, year, bonds with semiannual payments are selling for $ The beta is the yield on a month Treasury bill is and the yield on a year Treasury bond is The required return on the stock market is but the market has had an average annual return of during the past years. The firm's tax rate is Which of the following is the best estimate for the weight of debt for use in calculating the WACC? Do not round your intermediate calculations.
a
b
c
d
e
Sexton Inc. is considering Projects S and L whose cash flows are shown below. These projects are mutually exclusive, equally risky, and not repeatable. If the decision is made by choosing the project with the higher IRR, how much value will be forgone? Note that under certain conditions choosing projects on the basis of the IRR will not cause any value to be lost because the one with the higher IRR will also have the higher NPV so no value will be lost if the IRR method is used.
WACC:
CFS $ $ $ $ $
CFL $ $ $ $ $
a $
b $
c $
d $
Fool Proof Software is considering a new project whose data are shown below. The equipment that would be used has a year tax life, and the allowed depreciation rates for such property are and for Years through Under the new tax law, the equipment used in the project is eligible for bonus depreciation, so it will be fully depreciated at t Revenues and other operating costs are expected to be constant over the project's year expected life. What is the Year cash flow?
Equipment cost $
Sales revenues, each year $
Operating costs $
Tax rate
a $
b $
c $
d $
e $
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