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Please help me out. Please let me know if you would be willing to. Imagine a world where we pay all taxes like we pay

Please help me out. Please let me know if you would be willing to.

image text in transcribed Imagine a world where we pay all taxes like we pay sales taxes (i.e., "pay as you go"). Your firm is going to manufacture wooden tables. The project will last for ten years and require machinery that costs $20,000. The machines will be depreciated straight-line to $1,000 over ten years. The factory will be housed in a vacant warehouse that your firm owns. The warehouse is fully depreciated and has a market value of $150,000 today; it is expected to have a market value of $250,000 in ten years. An investment in net working capital of $3,000 is required. The machinery will have a pre-tax salvage value of $1,000 in year ten. The tax rate is 34%, and the discount rate is 10%. Fixed costs are $10,000 per year, pre-tax, paid at year-end. Each table will sell for $800 pre-tax and incur a variable cost of $360 pre-tax. The marketing department thinks that they can sell 2,400 tables annually. 1. What is the year-zero cash flow associated with using the building for this project? A. $150,000 B. $99,000 C. $0 D. $51,000 E. none of the above 2. Calculate OCF0. A. -$114,180 B. -$122,000 C. -$23,000 D. -$173,000 E. none of the above 3. Calculate OCF1-9. A. $691,006 B. $689,106 C. $688,006 D. $691,040 E. none of the above 4. What is the after-tax salvage value of the warehouse in Year 10? A. $165,000 B. $85,000 C. $99,000 D. $250,000 E. none of the above Use the following information to answer Questions 5-7. Your firm is considering the replacement of an existing piece of equipment. The old machine currently has a market value of $60,000. It has a book value of $80,000 and has going-forward depreciation charges of $20,000 per year. The new machine costs $120,000. If purchased, it will be depreciated straight-line to $40,000 over four years. The new machine will reduce variable costs by $2 per unit. The firm produces 5,000 units per year and sells them for $15 per unit; these numbers won't change if the machine is replaced. The new machine will reduce investment in net working capital by $20,000 immediately. The new machine will reduce fixed costs by $10,000 per year. There is no salvage value for the old machine projected for Year four. Your firm's tax rate is 34%; your cost of capital is 10%. 5. Calculate the year-zero cash flow associated with the potential sale of the old machine. A. $60,000 B. $66,800 C. $86,800 D. $96,800 E. none of the above 6. Suppose that you have sold the old machine and bought the new one. Calculate OCF2. A. $13,200 B. $16,600 C. $6,600 D. $29,800 E. none of the above 7. Assuming you buy the new equipment, what is the additional cash benefit (cost) that you will incur in Year 4? A. $26,400 B. $40,000 C. $50,000 D. $36,400 E. none of the above Use the following information to answer Questions 8-10. Your firm needs a new building. You can lease one for 20 years for an annual lease payment of $12,000 pre-tax ($7,920 after-tax), with the first lease payment due today. Alternatively, you can buy the building for $100,000 today and depreciate it for 20 years straight-line to zero. At the end of 20 years, the building will be worth $350,000. Your discount rate is 15% and your tax rate is 34%. Assume that today is April 15 (i.e., your first tax bill or tax credit is one year away). 8. What is the NPV of the cost of leasing the building? A. $158,400 B. $57,009.99 C. $86,378.77 D. $49,573.91 E. none of the above 9. What is the NPV of the cost of buying the building? A. $75,348.84 B. $75,244.97 C. $67,974.04 D. $73,167.56 E. none of the above 10. Assume that you are given the opportunity to buy a second building. You have determined that the NPV cost of buying the building is $100,000. What is the least that you would likely charge an unrelated tenant for an annual lease payment? (Assume the same lease terms, discount rate, and tax rate that is given above.) A. $13,892.30 B. $24,206.28 C. $21,048.94 D. $15,976.14 E. none of the above

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