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Please provide the answers for the questions on the attached file. Thank you Question 1 There are multiple factors that affect the present value of
Please provide the answers for the questions on the attached file. Thank you
Question 1 There are multiple factors that affect the present value of an annuity. Explain what these factors are and discuss how an increase in each will impact the both the present value and the future value of the annuity. Question 2 Pete's Garage just purchased some equipment at a cost of $650,000. What is the proper methodology for computing the depreciation expense for Year 3 if the equipment is classified as 5-year property for MACRS? The MACRS rates are 20 percent, 32 percent, 19.2 percent, 11.52 percent, 11.52 percent, and 5.76 percent for Years 1 to 6, respectively. A. $650,000 (1 .20) (1 .32) (1 .192) B. $650,000 (1 .20) (1 .32) C. $650,000 (1 .20) (1 .32) .192) D. $650,000 (1 .192) E. $650,000 .192 Please written down why did you chose that option for question#2? Give some details Question 3 Jamestown Ltd. currently produces boat sails and is considering expanding its operations to include awnings. The expansion would require the use of land the firm purchased three years ago at a cost of $142,000 that is currently valued at $137,500. The expansion could use some equipment that is currently sitting idle if $6,700 of modifications were made to it. The equipment originally cost $139,500 six years ago, has a current book value of $24,700, and a current market value of $39,000. Other capital purchases costing $780,000 will also be required. What is the amount of the initial cash flow for this expansion project? Question 4 Walks Softly sells customized shoes. Currently, it sells 14,800 pairs of shoes annually at an average price of $59 a pair. It is considering adding a lower-priced line of shoes that will be priced at $39 a pair. Walks Softly estimates it can sell 6,000 pairs of the lower-priced shoes but will sell 3,500 less pairs of the higher-priced shoes by doing so. What annual sales revenue should be used when evaluating the addition of the lower-priced shoes? Question 5 A project will produce operating cash flows of $45,000 a year for four years. During the life of the project, inventory will be lowered by $30,000 and accounts receivable will increase by $15,000. Accounts payable will decrease by $10,000. The project requires the purchase of equipment at an initial cost of $120,000. The equipment will be depreciated straight-line to a zero book value over the life of the project. The equipment will be salvaged at the end of the project creating a $25,000 after tax cash inflow. At the end of the project, net working capital will return to its normal level. What is the net present value of this project given a required return of 15 percent? Question 6 In working on a bid project you have determined that $318,000 of fixed assets will be required and that they will be depreciated straight-line to zero over the 6-year life of the project. You have also determined that the discount rate should be 18 percent and the tax rate will be 35 percent. In addition, the annual cash costs will be $198,200. After considering all of the project's cash flows you have determined that the required operating cash flow is $92,400. What is the amount of annual sales revenue that is required? Question 7 The Adept Co. is analyzing a proposed project. The company expects to sell 3,300 units, give or take 4 percent. The expected variable cost per unit is $11 and the expected fixed costs are $12,500. Cost estimates are considered accurate within a plus or minus 2 percent range. The depreciation expense is $2,000. The sale price is estimated at $19 a unit, give or take 2 percent. What is the contribution margin under the expected case scenario? Question 8 Angie's is analyzing a proposed project. The company expects to sell 1,800 units, give or take 6 percent. The expected variable cost per unit is $39 and the expected fixed costs are $32,500. Cost estimates are considered accurate within a plus or minus 4 percent range. The depreciation expense is $6,400. The sale price is estimated at $64 a unit, give or take 2 percent. What is the amount of the fixed cost per unit under the worst-case scenario? Question 9 A 3-year project has a contribution margin of $16, projected fixed costs of $120,000, a projected variable cost per unit of $12, straight-line depreciation for 3 years of $60,000 (per year), and a projected present value break-even point of 13,601.20 units. The tax rate is 34 percent and the discount rate is 13 percent. What is the equivalent annual costStep by Step Solution
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