Question
Please answer all 3 questions! Fairfax Pizza is evaluating a project that would require an initial investment in equipment of 100,000 dollars and that is
Please answer all 3 questions!
Fairfax Pizza is evaluating a project that would require an initial investment in equipment of 100,000 dollars and that is expected to last for 9 years. MACRS depreciation would be used where the depreciation rates in years 1, 2, 3, and 4 are 42 percent, 30 percent, 19 percent, and 9 percent, respectively. For each year of the project, Fairfax Pizza expects relevant, incremental annual revenue associated with the project to be 119,000 dollars and relevant, incremental annual costs associated with the project to be 98,000 dollars. The tax rate is 50 percent. What is (X plus Y) if X is the relevant operating cash flow (OCF) associated with the project expected in year 1 of the project and Y is the relevant OCF associated with the project expected in year 4 of the project?
Based on the following information, what is the relevant operating cash flow (OCF) associated with the project expected to be in year 2? The project would require an initial investment in equipment of 870,000 dollars that would be depreciated using MACRS where the depreciation rates in years 1, 2, 3, and 4 are 40 percent, 22 percent, 22 percent, and 16 percent, respectively. At the end of the project in 2 years, the equipment would be sold for an expected after-tax cash flow of 10,000 dollars. In year 2 of the project, relevant revenue associated with the project would be 466,400 dollars and relevant costs associated with the project would be 293,100 dollars. The tax rate is 40 percent.
Fairfax Paint operates stores in Virginia. The firm is evaluating the Vienna project, which would involve opening a new store in Vienna. During year 1, Fairfax Paint would have total revenue of 316,000 dollars and total costs of 212,000 dollars if it pursues the Vienna project, and the firm would have total revenue of 262,000 dollars and total costs of 189,000 if it does not pursue the Vienna project. Depreciation taken by the firm would be 93,000 dollars if the firm pursues the project and 65,000 dollars if the firm does not pursue the project. The tax rate is 45 percent. What is the relevant operating cash flow (OCF) for year 1 of the Vienna project that Fairfax Paint should use in its NPV analysis of the Vienna project?
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