My question is Q9, calculating projected OCF, thank you so much !
Il asset that costs $730,000 and is 10 Zero over its eight-year tax life. The asset is to be used vear project; at the end of the project, the asset can be sold for $192,000. If levant tax rate is 40 percent, what is the aftertax cash flow from the sale of this in a five-year project: the relevant to asset? 8. Calculating 9. Calculating Projecto leulating Salvage Value (LO1] An asset used in a four-year project falls in e five-year MACRS class for tax purposes. The asset has an acquisition cost of 500 000 and will be sold for $1,600,000 at the end of the project. If the tax rate is 35 percent, what is the aftertax salvage value of the asset? lculating Project OCF [LO1] Quad Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2.9 million. The fixed asset will be depreciated straight-line to zero over its three-year tax life, after which time it will be worthless. The project is estimated to generate $2,190,000 in annual sales, with costs of $815,000. If the tax rate is 35 percent, what is the OCF for this project? 10 Calculating Project NPV (LO1] In the previous problem, suppose the required return on the project is 12 percent. What is the project's NPV? 11. Calculating Project Cash Flow from Assets [LO1] In the previous problem, sup- pose the project requires an initial investment in net working capital of $300,000, and the fixed asset will have a market value of $210,000 at the end of the project. What is the project's Year 0 net cash flow? Year 1? Year 2? Year 3? What is the new NPV? 12. NPV and Modified ACRS (LO1] In the previous problem, suppose the fixed asset actually falls into the three-year MACRS class. All the other facts are the same. What is the project's Year 1 net cash flow now? Year 2? Year 3? What is the new NPV? Project Evaluation [LO1] Dog Up! Franks is looking at a new sausage system with an installed cost of $540,000. This cost will be depreciated straight-line to zero over the project's five-year life, at the end of which the sausage system can be scrapped for $80,000. The sausage system will save the firm $170,000 per year in pretax op- erating costs, and the system requires an initial investment in net working capital of $29,000. If the tax rate is 34 percent and the discount rate is 10 percent, what is the NPV of this project? 14. Project Evaluation LO1) Your firm is contemplating the purchase of a new $425,000 computer-based order entry system. The system will be depreciated 13. straight-line to zero over its five-year life. It will be worth $30,000 at the end of that time. You will save $130,000 before taxes per year in order processing costs, and you will be able to reduce working capital by $60,000 (this is a one-time reduction). If the tax rate is 35 percent, what is the IRR for this project? Proiect Evaluation [LO2) In the previous problem, suppose your required retum on the project is 11 percent and your pretax cost savings are $150,000 per year. Will moiect? What if the pretax cost savings are $100,000 per year? At mouhe indifferent between accepting the 15
