Problem 10-6 Calculating Depreciation [LO1] 10 A piece of newly purchased industrial equipment costs $970,000 and is classified as points seven-year property under MACRS. The MACRS depreciation schedule is shown in Table 10.7. Calculate the annual depreciation allowances and end-of-the-year book values for this equipment. (Leave no cells blank - be certain to enter "0" wherever required. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) eBook Year Beginning Book Value Depreciation Ending Book Value Print 1 3 References 5 6 8References Problem 9-28 NPU and IRR[LD1, 5] nderson International Limited is evaluating a project in Erewhon. The project will create the following cash flows: Year Cash Flow 0 $13 20,0 00 1 495,0 00 2 560,0 00 3 455,0 00 4 410,0 00 Jill cash flows will occur in Erewhon and are expressed in dollars. In an attempt to improve its economy, the Erewhonian government has declared that all cash ows created by a foreign company.r are \"blocked" and must be reinvested with the government for one year. The reinvestment rate for these funds is 3 percent. If nderson uses a required return of 14 percent on this project, what are the NFi'itir and IRR of the project? [A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16. Enter 1jrour IRH as a percent.) References project that provides annual cash flows of $16,6IEID for eight years costs $?2,DUD today. |What is the NPU for the project if the required return is 7" percent? [Do not round intermediate calculations. Round your answer to 2 decimal places, e.g., 32.16.} t a required return of?Ir percent, should the firm accept this project? (3" Accept {j- Reject lIl'lr'hat is the NPV for the project if the required return is 19 percent? {A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.1.} t a required return of 19 percent, should the firm accept this project? C- Accept f} Reject t what discount rate would you be indifferent between accepting the project and rejecting it? [Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.15.] a A Problem 10-13 NPV and Bonus Depreciation [LO1] 10 Quad Enterprises is considering a new three-year expansion project that requires an points initial fixed asset investment of $2.33 million. The fixed asset qualifies for 100 percent bonus depreciation in the first year. The project is estimated to generate $1,735,000 in annual sales, with costs of $640,000. The project requires an initial investment in net working capital of $300,000, and the fixed asset will have a market value of $255,000 at the end of the project. eBook a. If the tax rate is 25 percent, what is the project's Year 0 net cash flow? Year 1? Year 2? Year 3? (A negative answer should be indicated by a minus sign. Do not round Print intermediate calculations and enter your answers in dollars, not millions of dollars, e.g., 1,234,567.) b. If the required return is 9 percent, what is the project's NPV? (Do not round intermediate calculations and enter your answers in dollars, not millions of dollars, References rounded to two decimal places, e.g., 1,234,567.89.) a. Year 0 cash flow Year 1 cash flow Year 2 cash flow Year 3 cash flow b. NPVRe'erences Problem 9-20 MIRR [LDE] Solo Corp. is evaluating a project with the following cash flows: Year Cash Flow i} $29,891:] 1 12.9012] 2 WEEK] 3 15,6912] 4 13,?0'13 5 _ 113.2612] The company.r uses a discount rate of13 percent and a reinvestment rate of 6 percent on all of its projects. a. Calculate the MIRR of the project using the discounting approach. [Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places1 e.g.1 32.16.] b. Calculate the MIRR ofthe project using the reinvestment approach. {Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places1 e.g.1 32.16.] :. Calculate the MIRR of the project using the combination approach. {Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places1 e.g.1 32.16.] a Disoounling approach MIRR _- Reinvaslment approach MIRF'. _- Combination approach MIRR _- 6 Problem 9-15 Calculating Profitability Index [L07] 10 Year Cash Flow points O $ 17,900 10,200 WN - 9,100 5,600 eBook a. What is the profitability index for the set of cash flows if the relevant discount rate is 9 Print percent? (Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161.) b. What is the profitability index for the set of cash flows if the relevant discount rate is References 14 percent? (Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161.) c. What is the profitability index for the set of cash flows if the relevant discount rate is 21 percent? (Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161.) a. Profitability index b. Profitability index C. Profitability indexFie'erences Problem 10-19 Calculating EAC [L04] You are evaluating two different silicon wafer milling machines. The Techron | costs $291000. has a three-year life, and has pretax operating costs of $82,000 per year. The Techron || costs $515,000, has a fiye-year life, and has pretax operating costs of $55,000 per year. For both milling machines. use straight-line depreciation to zero over the project's life and assume a salvage value of $553,000. If your tax rate is 23 percent and your discount rate is 11 percent, compute the Eric for both machines. [11 negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.} Techron\" Which machine do you prefer? C' Techron II D Techron | Re'erences Problem 9-? Calculating IRR [L05] J1 firm evaluates all of its projects by applying the IRR rule. A project under consideration has the following cash flows: Tear Cash Flow 0 $28,200 1 12,200 2 15,200 3 11,200 If the required return is 13 percent. what is the IRR for this project? [Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.} \"-- Should the firm accept the project? If} No IL;- Yes 9 Problem 10-23 Comparing Mutually Exclusive Projects [LO1] 10 Letang Industrial Systems Company (LISC) is trying to decide between two different points conveyor belt systems. System A costs $330,000, has a four-year life, and requires $125,000 in pretax annual operating costs. System B costs $410,000, has a six-year life, and requires $119,000 in pretax annual operating costs. Both systems are to be depreciated straight-line to zero over their lives and will have zero salvage value. Whichever project is chosen, it will not be replaced when it wears out. The tax rate is 23 Book percent and the discount rate is 8 percent. Calculate the NPV for both conveyor belt systems. (A negative answer should be Hint indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) Print System A System B References Which conveyor belt system should the firm choose? O System B O System A10 \"ID po'nts References Problem 10-15 Project Evaluation [L01] Dog Up! Franks is looking at a new sausage system with an initial cost of $4?O,DOG that will last for five years. The fixed asset will oiualifyr for 1'39 percent bonus depreciation in the first year. at the end of which the sausage system can be scrapped for $63,990. The sausage system will save the firm $144,900 per year in pretax operating costs, and the system requires an initial investment in net working capital of $21500. If the tax rate is 23 percent and the discount rate is 11 percent. what is the NP'y' of this project? [Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.]