Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Celebrity Food is evaluating the kale crisper project. During year 1 , the kale crisper project is expected to have relevant revenue of $ 4

Celebrity Food is evaluating the kale crisper project. During year 1, the kale crisper project is expected to have relevant revenue of $400,000, relevant variable costs of $125,000, and relevant depreciation of $40,000. In addition, Celebrity Food would have one source of fixed costs associated with the kale crisper project. Celebrity Food just signed a deal with Lights Camera Action to develop an advertising campaign for use in the project. The terms of the deal require Celebrity Food to pay Lights Camera Action either $80,000 in 1 year if the project is pursued or $110,000 in 1 year if the project is not pursued. Relevant net income for the kale crisper project in year 1 is expected to be $200,000. What is the tax rate expected to be in year 1? Answer in decimal format, rounded to the nearest hundredth of a percent (for example, 1.23% would be entered as 0.0123).
What is the net present value of the flier project, which is a 3-year project where Dispersion would spread fliers all over Fairfax? The project would involve an initial investment in equipment of $570,000 today. To finance the project, Dispersion would borrow $570,000. The firm would receive $570,000 from the bank today and would pay the bank $640,000 in 3 years (consisting of an interest payment of $70,000 and a principal payment of $570,000). Cash flows from capital spending would be $0 in year 1, $0 in year 2, and $184,000 in year 3. Operating cash flows are expected to be $215,000 in year 1,-$60,000 in year 2, and $321,000 in year 3. The cash flow effects from the change in net working capital are expected to be $40,000 at time 0; $30,000 in year 1; -$10,000 in year 2, and $20,000 in year 3. The tax rate is 15 percent. The cost of capital is 5.08 percent and the interest rate on the loan would be 3.94 percent.

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

Step: 3

blur-text-image

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

Survey of Accounting

Authors: Paul D. Kimmel, Jerry J. Weygandt

1st edition

1119330025, 978-1119444244, 1119444241, 978-1119306474, 1119306477, 978-1119330028

More Books

Students also viewed these Accounting questions

Question

Is Dyson a customer-centered company? Explain. P+96

Answered: 1 week ago