Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Firm X has the opportunity to invest $290,000 in a new venture. The projected cash flows from the venture are as follows. Use Appendix A

image text in transcribed
image text in transcribed
image text in transcribed
image text in transcribed
image text in transcribed
Firm X has the opportunity to invest $290,000 in a new venture. The projected cash flows from the venture are as follows. Use Appendix A and Appendix B. Year 1 Year 0 $(290,000) Year 2 Year 3 Initial investment Revendes Expenses Return of investment Before-tax net cash flow $ 52,200 (31,320) $52,200 $ 52,200 (7,830) (7,830) 290,000 $44,370 $334,370 (290,000) $ 20,880 Firm X uses an 8 percent discount rate, and its marginal tax rate over the life of the venture will be 30 percent Required: a-1. Complete the below table to calculate NPV. Assume that the revenues are taxable income, and the expenses are deductible. a-2. Should firm X make the investment? b-1. Complete the below table to calculate NPV. Assume that the revenues are taxable income, but the expenses are nondeductible. b-2. Should firm X make the investment? Required: a-1. Complete the below table to calculate NPV. Assume that the revenues are taxable income, and the expenses are deductible. a-2. Should firm X make the investment? b-1. Complete the below table to calculate NPV. Assume that the revenues are taxable income, but the expenses are nondeductible. b-2. Should firm X make the investment? Complete this question by entering your answers in the tabs below. Req A1 Reg A2 Req Bi Req B2 Complete the below table to calculate NPV. Assume that the revenues are taxable income, and the expenses are deductible. (Cash outflows and negative amount should be indicated by a minus sign. Round discount factor(s) to 3 decimal places, all other intermediate calculations and final answers to the nearest whole dollar amount) Year Year 1 52 200 $ (290.000 Year 2 52 200 Year 52 200 Before-tax cash flow The cost Net cash flow Discount factor (8%) Present value NPV $ 52.2005 52.2005 52.200 $ (290.000) Complete this question by entering your answers in the tabs below. Reg A1 Reg A2 Reg B1 Reg 2 Should firm X make the investment? Firm X should make the investment Complete this question by entering your answers in the tabs below. Reg A1 Reg A2 Req B1 Req B2 Complete the below table to calculate NPV. Assume that the revenues are taxable income, but the expenses are nondeductible. (Cash outflows and negative amount should be indicated by a minus sign. Round discount factor(s) to 3 decimal places, all other intermediate calculations and final answers to the nearest whole dollar amount.) Year 1 Year 2 Year o (290,000) Year 3 $ Before-tax cash flow Tax cost Net cash flow Discount factor (8%) Present value NPY $ o$ 0 $ 0 $ (290,000) Complete this question by entering your answers in the tabs below. Reg A1 Req A2 Req B1 Req B2 Should firm X make the investment? Firm X should make the investment

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_2

Step: 3

blur-text-image_3

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

More Books

Students also viewed these Accounting questions

Question

8. What are the stages in agile development?

Answered: 1 week ago