Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Firm X has the opportunity to invest $342,000 in a new venture. The projected cash flows from the venture are as follows. Use Anpendix A

image text in transcribed
image text in transcribed
image text in transcribed
Firm X has the opportunity to invest $342,000 in a new venture. The projected cash flows from the venture are as follows. Use Anpendix A and Appendix B. Year 1 rear 3 $52,800 52,800 342,000 21,120$44,880 386,880 Year o (342,000) rear 2 Initial investment Revenues Expenses Return of investment Before-tax net cash flow 52,800 (31,680) (7,920 (7,920) (342,000) Firm X uses an 8 percent discount rate, and its marginal tax rate over the life of the venture will be 20 percent. 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 Req A2 Req B1 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 intermediate calculations and final answers to the nearest whole dollar amount.) Year 0 Year 1 Year 2 Year 3 $ (342,000) 21,120 Before-tax cash flow Tax cost Net cash flow Discount factor (8%) Present value NPV 44,880 386,880 21,120S 4,880 $ 386,880 (342.000) Req A1Req A2 Req B1 Req B2 Complete the below table to calculate NPV. Assumetht 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 intermediate calculations.and final answers to the nearest whole dollar.amount) Year 0 Year 1 Year 2 Year 3 Before-tax cash flow Tax Net cash flow Discount factor (8%) Present value NPV cost

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access with AI-Powered 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

Students also viewed these Accounting questions