Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

please help with these 3 thank youu! Silver Sun Health is evaluating the apple orchard project, a 2-year project that would involve buying equipment for

please help with these 3 thank youu!
image text in transcribed
Silver Sun Health is evaluating the apple orchard project, a 2-year project that would involve buying equipment for 34,000 dollars that would be depreciated to zero over 2 years using straight-line depreciation. Cash flows from capital spending would be $0 in year 1 and 23,000 dollars in year 2. Relevant annual revenues are expected to be 62,000 dollars in year 1 and 62,000 dollars in year 2. Relevant expected annual variable costs from the project are expected to be 15,000 dollars in year 1 and 15,000 dollars in year 2. Finally, the firm has no fixed costs in year 1 and one fixed cost in year 2 of the project. Yesterday. Silver Sun Health signed a deal with Orange Valley Marketing to develop an advertising campaign. The terms of the deal require Silver Sun Health to pay Orange Valley Marketing either 76,000 dollars in 2 years from today if the apple orchard project is pursued or 50,000 dollars in 2 years from today if the apple Orchard project is not pursued. The tax rate is 40 percent and the cost of capital for the apple orchard project is 8.37 percent. What is the net present value of the apple orchard project? Number Indigo River Recycling is considering a project that would last for 2 years and have a cost of capital of 12.15 percent. The relevant level of net working capital for the project is expected to be 18,000 dollars immediately (at year O): 10,000 dollars in 1 year; and 0 dollars in 2 years. Relevant expected revenue, costs, depreciation, and cash flows from capital spending in years 0, 1, and 2 are presented in the following table (in dollars). The tax rate is 50 percent. What is the net present value of this project? Year o Year 1 Year 2 Revenue SO 223,000 223,000 Costs $0 66,000 66,000 SO 39,000 39,000 Depreciation Cash flows from capital spending -82,000 0 16,000 Number Silver Sun Entertainment is considering a project that would last for 2 years. The project would involve an initial investment of 105,000 dollars for new equipment that would be sold for an expected price of 91,000 dollars at the end of the project in 2 years. The equipment would be depreciated to 25,000 dollars over 8 years using straight-line depreciation. In years 1 and 2, relevant annual revenue for the project is expected to be 111,000 dollars per year and relevant annual costs for the project are expected to be 39,000 dollars per year. The tax rate is 50 percent and the cost of capital for the project is 6.09 percent. What is the net present value of the project

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

More Books

Students also viewed these Accounting questions