Question
Details Yrs. 1 2 3 4 5 6 7 8 Sales (units) 3000 5000 6000 6500 6000 5000 4000 3000 Fixed Costs 25000 25000 25000
Details | Yrs. 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 |
Sales (units) | 3000 | 5000 | 6000 | 6500 | 6000 | 5000 | 4000 | 3000 |
Fixed Costs | 25000 | 25000 | 25000 | 25000 | 25000 | 25000 | 25000 | 25000 |
Annual Depreciation | 114320 | 195920 | 139920 | 99920 | 71440 | 71440 | 71440 | 35600 |
1. Project X is being appraised and has the following details:
The following information is also available:
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Unit selling price is expected to be $120 for the first 3 years then fall to $110 thereafter.
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Unit variable costs will remain constant at $60/unit throughout the project life
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The project required initial outlay of $800 000
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The firms marginal tax rate is 34% and the required rate of return is 15%
Required:
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Calculate the projects operating cash flows. (12 marks)
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What is the projects NPV. (5 marks)
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Is the project acceptable or not why? (3 marks)
What are the factors that influence a firms dividend policy (5 marks)
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