Font Arial Regu Charac Allig would depend on whetherarof $1.2000 and 25% chance 4. A fimm is considering a new project whose data are shown below. The equipment that would be used has a 3year tax life according to MACRS and depreciation rates for such equipment are 33%, 45%, 15%, and 7% for Years 1 through 4 respectively. Revenues and other operating costs are expected to be constant over the project's 10 year expected life. What is the Year 2 cash flow? Equipment cost depreciable basis) $100,000 Sales revenues, each year $60,000 Operating costs (excl. depreciation) $25,000 Interest expense $4,000 Tax rate 20% 5. A firm is now at the end of the final year of a project. The equipment originely cost $650.000, of which 80% has been depreciated. The firm can sel the used equipment today for $100,000, and its tax rate is 21%. Wil the company pay tax or receive a tax credit and how much? 6. A company is considering two may exclusive projects. Both require an initial investment of $10,000 at 0. Project X has an expected life of 2 years with after-tax cash inflows of $8,000 and $7.000 at the end of Years 1 and 2 respectively. In addition Project X can be repeated at the end of Year 2 with no changes in its cost or cash flows Project Y has an expected life of 4 years with after-tax cash inflows of $4,000 $4,250, 54.500 and $4.750 at the end of each of the next 4 years, respectively. Each project has a WACC of 12%. Using the replacement chain approach or equivalent annual annuity, which is the most profitable project and why? 7. A company is evaluating a project that would require a 55 milion Investment today). The after-tax cash flows that it won'tIf of each yours. If the tax doesn't pass the after-tax cash fowe will be $2,000,000 for 5 years. The project has a WACC of 12% The firm would have the option to abandon the project 1 year from now, and it is abandoned, the firm would receive the the company would receive no further cash inflows from it. What is the value of this abandonment option should the company take the project? Do not round intermediate calculations 8. Acompany is considering a new product that would require an investment of $10 million now, if the new product is well received, then the project would produce after tax cash flows of $6 million at the end of each of the next 3 years t 1.2.3), but if the market did not like the product, then the cash fows would be only $2 million per year. There is a 50% probability that the market will be good. The firm could delay the project for a year while it conduct a best to determine if demand is likely to be strong or weak, but it would have to inour costs to obtain this timing option. The project's cost and expected annual cash flows would be the same whether the project is delayed or not. The project's WACC IS 15%. What is the value of the option to delay the project? Should the company take the project? Do not round intermediate calculations in class we reviewed the title option in Chapter 13 Section 13.5, in which a company wached products DH mentioned that often these flexible options can contain a mix of one or more options. For the option we discussed in class, at is provided in Figure 134 below, explainer vily where in the problem the other options timing (delay abandon, growth) appear Spas Bulle