E Business Course Return to course Weighted Average Cost of Capital and Net Present Value Analysis Tate Company is considering a proposal to acquire new equipment for its manufacturing division. The equipment will cost $210,000, be useful for four years, and have a 516,000 salvage value. Tate expects annual savings in cash operating expenses (before taxes) of 572,000. For tax purposes, the annual depreciation deduction will be $70,000, 594,000, $30,600, and 515,400, respectively, for the four years (the salvage value is ignored on the tax return). The income tax rate is 40%. Tate establishes a hurdle rate for a net present value analysis at the company's weighted average cost of capital plus 1 percentage point. Tate's capital is provided in the following proportions: debt, 60%, common stock, 20%; and retained earnings, 2096. The cost rates for these capital sources are debt, 10% common stock, 12%; and retained earnings, 13%. a. Compute Tate's (1) weighted average cost of capital and (2) hurdle rate. Round answers to one decimal place. For example, 0.4567 - 45.7% Weighted Average cost of Capital Debt OM Common stock 0 % Retained earning 0 % (1) Weighted ave. cost of capital (2) Tate's hurdle rate: 06 Support 09 b. Using Tate's hurdle rate, compute the net present value of this capital expenditure proposal Round answers to the nearest whole number. Use rounded answers for subsequent calculations. Use a negative sign with net present value to indicate a negative amount. Otherwise do not use negative signs with your answers After Tax Cash Flow Analysis Amount Present Value After tax cash expense savings 05 Tak savings from depreciation Type here to search o Made TI 4:27 PM 10/8/2020 hp ser EDLISITIOSSLOTS b. Using Tate's hurdle rate, compute the net present value of this capital expenditure proposal. Round answers to the nearest whole number. Use rounded answers for subsequent calculations. Use a negative sign with net present value to indicate a negative amount. Otherwise do not use negative signs with your answers. After-Tax Cash Flow Analysis Amount Present Value After tax cash expense savings 0$ Tax Savings from depreciation Year! 0 Year 2 0 Year 0 Year 4 0 0 Alter-tax equipment sale proceeds 0 Total present value of future cash flows 0 Investment required in equipment 0 Net positive negative) present value 5 0 0 Under the net present value analysis, should Tate accept the proposal? Select the most appropriate answer below. OTate should not accept the proposal, because its net present value is positive. Tate should accept the proposal, because its net present value is negative Tate should accept the proposal because its net present value is positive. Tate should not accept the proposal, because its net present value is negative. Type here to search O i 428 PM 10/1/2020 (hp) 0 Question 4 Not complete Marked out of 1.00 Flag question Weighted Average Cost of Capital and Net Present Value Analysis Tate Company is considering a proposal to acquire new equipment for its manufacturing division. The equipment will cost $210,000, be useful for four years, and have a $16,000 salvage value. Tate expects annual savings in cash operating expenses (before taxes) of $72,000. For tax purposes, the annual depreciation deduction will be $70,000, $94,000, $30,600, and $15,400, respectively, for the four years (the salvage value is ignored on the tax return). The income tax rate is 40%. Tate establishes a hurdle rate for a net present value analysis at the company's weighted average cost of capital plus 1 percentage point. Tate's capital is provided in the following proportions: debt, 60%; common stock 20% and retained earnings, 20%. The cost rates for these capital sources are debt, 10%; common stock, 12%; and retained earnings, 13%. a. Compute Tate's (1) weighted average cost of capital and (2) hurdle rate. Round answers to one decimal place. For example, 0.4567 - 45.7%. Weighted Average Cost of Capital Debt Common stock 0 % Retained earnings 0 % (1) Weighted avg. cost of capital 09 (2) Tate's hurdle rate 0 % b. Using Tate's hurdle rate, compute the net present value of this capital expenditure proposal. Round answers to the nearest whole number. Use rounded answers for subsequent calculations. Use a negative sign with net present value to indicate a negative Type here to search ORL 2 90 11:23 AM 10/9/2012 Business Course A Return to course a. Compute Tate's (1) weighted average cost of capital and (2) hurdle rate. Round answers to one decimal place. For example, 0.4567 = 45.7%. Weighted Average Cost of Capital 0 % Common stock 096 Retained earnings 096 (1) Weighted avg. cost of capital 0 % (2) Tate's hurdle rate: 0 % Debt b. Using Tate's hurdle rate, compute the net present value of this capital expendit Round answers to the nearest whole number. Use rounded answers for subseque amount. Otherwise do not use negative signs with your answers. After-Tax Cash Flow Analysis Present Value After-tax cash expense savings Tax savings from depreciation Year 1 Amount 0 $ 0 Year 2 Year 3 o o o o o Year 4 After-tax equipment sale proceeds Total present value of future cash flows Investment required in equipment Net positive (negative) present value Type here to search $ O BE (1) Weighted avg. cost of capital (2) Tate's hurdle rate: 0 % 09 OOOOOOOO b. Using Tate's hurdle rate, compute the net present value of this capital expenditure proposal. Round answers to the nearest whole number. Use rounded answers for subsequent calculations. Use a negative sign with net present value to indicate a negative amount. Otherwise do not use negative signs with your answers. After-Tax Cash Flow Analysis Amount Present Value After-tax cash expense savings os 0 Tax Savings from depreciation Year! 0 Year 2 0 Year 3 0 Year 4 0 After-tax equipment sale proceeds Total present value of future cash flows Investment required in equipment Net positive negative present value 113 Type here to search ORI 10 D $ @2 3 % 5 6 8 W E R Y Business Course A Return to course amount. Otherwise do not use negative signs with your answers. After-Tax Cash Flow Analysis Amount Present Value After-tax cash expense savings 0 $ Tax savings from depreciation Year 1 $ 0 0 0 Year 2 0 0 Year 3 0 0 0 0 0 0 Year 4 After-tax equipment sale proceeds Total present value of future cash flows Investment required in equipment Net positive (negative) present value 0 0 $ 0 Under the net present value analysis, should Tate accept the proposal? Select the most appropriate answer below. Tate should not accept the proposal, because its net present value is positive. Tate should accept the proposal, because its net present value is negative. Tate should accept the proposal, because its net present value is positive. Tate should not accept the proposal, because its net present value is negative. Check Type here to search o E Business Course Return to course Weighted Average Cost of Capital and Net Present Value Analysis Tate Company is considering a proposal to acquire new equipment for its manufacturing division. The equipment will cost $210,000, be useful for four years, and have a 516,000 salvage value. Tate expects annual savings in cash operating expenses (before taxes) of 572,000. For tax purposes, the annual depreciation deduction will be $70,000, 594,000, $30,600, and 515,400, respectively, for the four years (the salvage value is ignored on the tax return). The income tax rate is 40%. Tate establishes a hurdle rate for a net present value analysis at the company's weighted average cost of capital plus 1 percentage point. Tate's capital is provided in the following proportions: debt, 60%, common stock, 20%; and retained earnings, 2096. The cost rates for these capital sources are debt, 10% common stock, 12%; and retained earnings, 13%. a. Compute Tate's (1) weighted average cost of capital and (2) hurdle rate. Round answers to one decimal place. For example, 0.4567 - 45.7% Weighted Average cost of Capital Debt OM Common stock 0 % Retained earning 0 % (1) Weighted ave. cost of capital (2) Tate's hurdle rate: 06 Support 09 b. Using Tate's hurdle rate, compute the net present value of this capital expenditure proposal Round answers to the nearest whole number. Use rounded answers for subsequent calculations. Use a negative sign with net present value to indicate a negative amount. Otherwise do not use negative signs with your answers After Tax Cash Flow Analysis Amount Present Value After tax cash expense savings 05 Tak savings from depreciation Type here to search o Made TI 4:27 PM 10/8/2020 hp ser EDLISITIOSSLOTS b. Using Tate's hurdle rate, compute the net present value of this capital expenditure proposal. Round answers to the nearest whole number. Use rounded answers for subsequent calculations. Use a negative sign with net present value to indicate a negative amount. Otherwise do not use negative signs with your answers. After-Tax Cash Flow Analysis Amount Present Value After tax cash expense savings 0$ Tax Savings from depreciation Year! 0 Year 2 0 Year 0 Year 4 0 0 Alter-tax equipment sale proceeds 0 Total present value of future cash flows 0 Investment required in equipment 0 Net positive negative) present value 5 0 0 Under the net present value analysis, should Tate accept the proposal? Select the most appropriate answer below. OTate should not accept the proposal, because its net present value is positive. Tate should accept the proposal, because its net present value is negative Tate should accept the proposal because its net present value is positive. Tate should not accept the proposal, because its net present value is negative. Type here to search O i 428 PM 10/1/2020 (hp) 0 Question 4 Not complete Marked out of 1.00 Flag question Weighted Average Cost of Capital and Net Present Value Analysis Tate Company is considering a proposal to acquire new equipment for its manufacturing division. The equipment will cost $210,000, be useful for four years, and have a $16,000 salvage value. Tate expects annual savings in cash operating expenses (before taxes) of $72,000. For tax purposes, the annual depreciation deduction will be $70,000, $94,000, $30,600, and $15,400, respectively, for the four years (the salvage value is ignored on the tax return). The income tax rate is 40%. Tate establishes a hurdle rate for a net present value analysis at the company's weighted average cost of capital plus 1 percentage point. Tate's capital is provided in the following proportions: debt, 60%; common stock 20% and retained earnings, 20%. The cost rates for these capital sources are debt, 10%; common stock, 12%; and retained earnings, 13%. a. Compute Tate's (1) weighted average cost of capital and (2) hurdle rate. Round answers to one decimal place. For example, 0.4567 - 45.7%. Weighted Average Cost of Capital Debt Common stock 0 % Retained earnings 0 % (1) Weighted avg. cost of capital 09 (2) Tate's hurdle rate 0 % b. Using Tate's hurdle rate, compute the net present value of this capital expenditure proposal. Round answers to the nearest whole number. Use rounded answers for subsequent calculations. Use a negative sign with net present value to indicate a negative Type here to search ORL 2 90 11:23 AM 10/9/2012 Business Course A Return to course a. Compute Tate's (1) weighted average cost of capital and (2) hurdle rate. Round answers to one decimal place. For example, 0.4567 = 45.7%. Weighted Average Cost of Capital 0 % Common stock 096 Retained earnings 096 (1) Weighted avg. cost of capital 0 % (2) Tate's hurdle rate: 0 % Debt b. Using Tate's hurdle rate, compute the net present value of this capital expendit Round answers to the nearest whole number. Use rounded answers for subseque amount. Otherwise do not use negative signs with your answers. After-Tax Cash Flow Analysis Present Value After-tax cash expense savings Tax savings from depreciation Year 1 Amount 0 $ 0 Year 2 Year 3 o o o o o Year 4 After-tax equipment sale proceeds Total present value of future cash flows Investment required in equipment Net positive (negative) present value Type here to search $ O BE (1) Weighted avg. cost of capital (2) Tate's hurdle rate: 0 % 09 OOOOOOOO b. Using Tate's hurdle rate, compute the net present value of this capital expenditure proposal. Round answers to the nearest whole number. Use rounded answers for subsequent calculations. Use a negative sign with net present value to indicate a negative amount. Otherwise do not use negative signs with your answers. After-Tax Cash Flow Analysis Amount Present Value After-tax cash expense savings os 0 Tax Savings from depreciation Year! 0 Year 2 0 Year 3 0 Year 4 0 After-tax equipment sale proceeds Total present value of future cash flows Investment required in equipment Net positive negative present value 113 Type here to search ORI 10 D $ @2 3 % 5 6 8 W E R Y Business Course A Return to course amount. Otherwise do not use negative signs with your answers. After-Tax Cash Flow Analysis Amount Present Value After-tax cash expense savings 0 $ Tax savings from depreciation Year 1 $ 0 0 0 Year 2 0 0 Year 3 0 0 0 0 0 0 Year 4 After-tax equipment sale proceeds Total present value of future cash flows Investment required in equipment Net positive (negative) present value 0 0 $ 0 Under the net present value analysis, should Tate accept the proposal? Select the most appropriate answer below. Tate should not accept the proposal, because its net present value is positive. Tate should accept the proposal, because its net present value is negative. Tate should accept the proposal, because its net present value is positive. Tate should not accept the proposal, because its net present value is negative. Check Type here to search o