Need all 3 questions answered in detail please!

SOLUTIONS TO SPREADSHEET QUESTIONS 9.1 NPV = 54515 92 NPV = $4459 9.3 NPV = 55.741. NP rises the real value of depreciation allowance tion tax shield is higher when the inflation rate is lower. MINICASE Jack Taf, CR Sheet &Han company confidential envelope. It contained a draft fam i tive bid for a contract to supply duffel canvas to the US Navy. The cover memo from Sheetbend's CEO asked Mr. Tar to review the bid before it was submitted The biais sunting dan he b Sheetbend's sales staff. It called for Sheetbend to supply 100.000 yards of duffel canvas per year for 5 years. The proposed selline price was fixed at $ per yard Mr. Tar was not usually involved in sales, but this bid was unusual in at least two respects. First, if accepted by the navy. it would commit Sheetbend to a fixed prise, long-term contract Second, producing the duffel canvas would require an investment of $1.5 million to purchase machinery and to refurbish Sheethend's plant in Pleasantboro, Maine, Mr. Tar set to work and, by the end of the week, had collected the following facts and assumptions: Th Sims l le deprecated on the year MACS The refurbished plant and new machinery would last for many years. However, the remaining market for duffel canvas was small, and it was not clear that additional orders could be b en washed. The was custom-built and could be used only for duffel canvas hand value at the end of 5 years was probably zero. Table 9.4 shows the sales staff's forecasts of income from the Mr. T reviewed this forecast and decided that its assumptions were reasonable, except that the forecast used book, not tax, depreciation the cast income statement contained no mention of working capital. Mr. Tar thought that working capital would average about 10% of sales. The plant in Pleasantboro had been built in the early 1900s and is now idle. The plant was fully depreciated on Shechend's books, except for the purchase cost of the land of S10.000. Now that the land was valuable shorefront property. Mr. Tar thought the land and the idle plant could be sold, immediately or in the near future, for $600,000. Refurbishing the plant would cost S500.000. This investment would be depreciated for tax purposes on the 10-year MACRS schedule. Armed with this information. Mr. Tar constructed a spreadsheet to calculate the NPV of the duffel canvas project, assuming that Shoesbend's bid would be accepted by the navy. He had just finished debugging the spreadsheet when another confidential cnvelope arrived from Sheetbend's CEO. It contained afirm offer from a Maine real estate developer to purchase Sheetbend's Pleasantboro land and plant for $1.5 million in cash. Should Mr. Tar recommend submitting the bid to the navy at the proposed price of 530 per yard? The discount rate for this project is 12 TABLE 9.4 Forecast income statement for the U.S. Navy duffel canvas project (dollar values in thousands, except price per yard) Year: 1. Yards sold 2. Price per yard 3. Revenue (1 x 2) 4. Cost of goods sold 5. Operating cash flow (3-4) 6. Depreciation 7. Income (5-6) 8. Tax at 35% 9. Net income (7-8) 1 100.00 30.00 3,000.00 2,100.00 900.00 250.00 650.00 227.50 $422.50 2 100.00 30.00 3,000.00 2.184.00 816.00 250.00 566,00 198.10 $367.90 3 100.00 30.00 3,000.00 2,271.36 728.64 250.00 478.64 167.52 $311.12 4 100.00 30.00 3,000.00 2.36221 637.79 250.00 387.79 135.72 $252.07 5 100.00 30.00 3,000.00 2.456.70 543.30 250.00 293.30 102.6 $190.6 Notes: 1. Yards sold and price per yard would be fixed by contract. 2. Cost of goods includes fixed cost of $300,000 per year plus variable costs of $18 per yerd. Costs are expecte increase at the inflation rate of 4% per year. 3. Depreciation: A $1 milion Investment in machinery is deprecated straight line over 5 years $200.000 per yea $500,000 cost of refurbishing the Pleasantboro plant is depreciated straight line over 10 years (550.000 pery SOLUTIONS TO SPREADSHEET QUESTIONS 9.1 NPV = 54515 92 NPV = $4459 9.3 NPV = 55.741. NP rises the real value of depreciation allowance tion tax shield is higher when the inflation rate is lower. MINICASE Jack Taf, CR Sheet &Han company confidential envelope. It contained a draft fam i tive bid for a contract to supply duffel canvas to the US Navy. The cover memo from Sheetbend's CEO asked Mr. Tar to review the bid before it was submitted The biais sunting dan he b Sheetbend's sales staff. It called for Sheetbend to supply 100.000 yards of duffel canvas per year for 5 years. The proposed selline price was fixed at $ per yard Mr. Tar was not usually involved in sales, but this bid was unusual in at least two respects. First, if accepted by the navy. it would commit Sheetbend to a fixed prise, long-term contract Second, producing the duffel canvas would require an investment of $1.5 million to purchase machinery and to refurbish Sheethend's plant in Pleasantboro, Maine, Mr. Tar set to work and, by the end of the week, had collected the following facts and assumptions: Th Sims l le deprecated on the year MACS The refurbished plant and new machinery would last for many years. However, the remaining market for duffel canvas was small, and it was not clear that additional orders could be b en washed. The was custom-built and could be used only for duffel canvas hand value at the end of 5 years was probably zero. Table 9.4 shows the sales staff's forecasts of income from the Mr. T reviewed this forecast and decided that its assumptions were reasonable, except that the forecast used book, not tax, depreciation the cast income statement contained no mention of working capital. Mr. Tar thought that working capital would average about 10% of sales. The plant in Pleasantboro had been built in the early 1900s and is now idle. The plant was fully depreciated on Shechend's books, except for the purchase cost of the land of S10.000. Now that the land was valuable shorefront property. Mr. Tar thought the land and the idle plant could be sold, immediately or in the near future, for $600,000. Refurbishing the plant would cost S500.000. This investment would be depreciated for tax purposes on the 10-year MACRS schedule. Armed with this information. Mr. Tar constructed a spreadsheet to calculate the NPV of the duffel canvas project, assuming that Shoesbend's bid would be accepted by the navy. He had just finished debugging the spreadsheet when another confidential cnvelope arrived from Sheetbend's CEO. It contained afirm offer from a Maine real estate developer to purchase Sheetbend's Pleasantboro land and plant for $1.5 million in cash. Should Mr. Tar recommend submitting the bid to the navy at the proposed price of 530 per yard? The discount rate for this project is 12 TABLE 9.4 Forecast income statement for the U.S. Navy duffel canvas project (dollar values in thousands, except price per yard) Year: 1. Yards sold 2. Price per yard 3. Revenue (1 x 2) 4. Cost of goods sold 5. Operating cash flow (3-4) 6. Depreciation 7. Income (5-6) 8. Tax at 35% 9. Net income (7-8) 1 100.00 30.00 3,000.00 2,100.00 900.00 250.00 650.00 227.50 $422.50 2 100.00 30.00 3,000.00 2.184.00 816.00 250.00 566,00 198.10 $367.90 3 100.00 30.00 3,000.00 2,271.36 728.64 250.00 478.64 167.52 $311.12 4 100.00 30.00 3,000.00 2.36221 637.79 250.00 387.79 135.72 $252.07 5 100.00 30.00 3,000.00 2.456.70 543.30 250.00 293.30 102.6 $190.6 Notes: 1. Yards sold and price per yard would be fixed by contract. 2. Cost of goods includes fixed cost of $300,000 per year plus variable costs of $18 per yerd. Costs are expecte increase at the inflation rate of 4% per year. 3. Depreciation: A $1 milion Investment in machinery is deprecated straight line over 5 years $200.000 per yea $500,000 cost of refurbishing the Pleasantboro plant is depreciated straight line over 10 years (550.000 pery