Sanad Inc. is considering replacing an existing piece of equipment with a more sophisticated machine. The following information is given. Facts Existing Machine Proposed Machine Cost = $100,000 Cost = $150,000 Purchased 2 years ago Installation - $20,000 Depreciation using MACRS Over Depreciation-the MACRS a 5-year recover schedule 5-year recovery schedule will be used Current market value = $105,000 Five year usable life remaining Five year usable life expected Earnings before Depreciation and Taxes Existing Machine Proposed Machine Year 1 $160,000 Year 1 $170,000 2 150,000 2 170,000 3 140,000 3 170,000 4 140,000 4 170,000 5 140,000 5 170,000 The firm has determined its optimal capital structure, which is composed of the following sources and target market value proportions: Target Market Source of Capital Proportions 30% Long-term debt. Preferred Stock 15% Common Stock 55% Call us: +97(0/2)-2-2982000 E-mail: help@ritos Debt: The firm can sell a 20-year. $1,000 par valve, 7 percent bond for $940. A flotation cost of 2 percent of the lace value would be required in addition to the discount of $10. Preferred Stock. The firm has determined It can issue preferred stock at $65 per share par value. The stock will pay an $8.00 annual dividend. The flotation cost stock is $7 per share. Common Stock: The firm's common stock is currently selling for $50 per share. The dividend expected to be paid at the end of the coming year is $5.07. Its dividend payments have been growing at a constant rate for the last five years. Five years ago, the dividend was $3.45, a new common stock issue must be underpriced at $1 per shore and the firm must pay 53 per share in flotation costs. The firm pays 20 percent taxes on ordinary income and capital gains. Sanad invests $7,000 in NWC that will be recovered at the final year of the project. Calculate the book value of the existing asset being replaced Calculate the tax attect from the sale of the existing asset Calculate the initial investment required for the new one Calculate the incremental earnings before depreciation MacBook Air * 90 2 # 3 $ 4 % 5 & 7 OD + 6 9 2 V 9 0 W E 20 Y bi A A IS S DSF IK G Hij J Calculate the incremental depreciation in years 3 and 5. Calculate the incremental after-tax cash flow for years t = 2 through Calculate the final cash flow, if you know that the existing machine was fully deprecated and sold at $40,000, while the proposed machine sold at $190,000 after 4 years from the date of purchase Calculate the weighted average cost of capital assuming the firm has exhausted all red coming Che cost of debt Che cost of preferred stock MacBook Air * % & S 4 2 3 1 9 6 9 0 V 8 7 2 Q W E R Y S DSF Hi K K J 3 . IZ IX . CV | IN M Call us: +97(0/2) 2.2982000 E-mail: help ritops Calculate the cost of common stock the growth rate of common stock dividends Compute the payback period for these projects Compute the NPV? Compute the PIT Compute the EVA for the third year? Determine whether the replacement decision should be accepted or not? MacBook Air 13 # 3 $ 4 % 5 & 7 P V 2 1 9 8 T 0 6 7 A 2 Q W & R T Y U E lo S DSF A H G i . CYB IN M Call us: +970/21-2-2982000 Email: help ritops Debt: The firm can sell a 20-year $1,000 par valve, 7 percent bond for $990. A flotation cost of 2 percent of the lace value would be required in addition to the discount of $10. Preferred Stock. The firm has determined it can issue preferred stock at $65 per share par value. The stock will pay an $8.00 annual dividend. The flotation cost stock is $7 per share. Common Stock: The firm's common stock is currently selling for $50 per share. The dividend expected to be paid at the end of the coming year is $5.07. Its dividend payments have been growing at a constant rate for the last five years. Five years ago, the dividend was $3.45, a new common stock issue must be underpriced at $1 per shore and the firm must pay 53 per share in flotation costs The firm pays 20 percent taxes on ordinary income and capital gains. Sanad invests $7,000 in NWC that will be recovered at the final year of the project. Calculate the book value of the existing asset being replaced Calculate the tax attect from the sale of the existing asset. Calculate the initial investment required for the new set Calculate the incremental rings before depreciation MacBoo Air DO GOD 4 >> A $ 4 & 7 3 2 5 6 V 8 9 0 Q W E R Y Cei .. A IS S D F IK HTJ J Calculate the incremental depreciation in years 3 and 5. Calculate the incremental after-tax cash flow for years t = 2 thought Calculate the minal cash flow. If you know that the existing machine was fully deprecated and sold at $40.000 ile the proposed machine sold at $190,000 after 4 years from the date of purchase Calculate the weighted average cost of capital assuming the firm has exhausted all red coming Checa el debt Che cost of profeedstock MacBook Air See % & S 4 3 2 6 V 7 A 8 9 2 9 W E R Y IS DSF Hi K K J C IZ N CIV | IN !M Call us: +97(0/2) 2.29820009 Email: help tops Calculate the cost of common stock the growth rate of common stock dividends Compute the payback period for these projects Compute the NPV? Compute the PIT Compute the EVA for the third year? Determine whether the replacement decision should be accepted or not? MacBook Air BO 13 A # 3 $ 4 % 5 & 7 V 1 8 2 9 A 0 6 7 2 Q R $ W T Y U E lo S G A DSF 1 CYB i NM Sanad Inc. is considering replacing an existing piece of equipment with a more sophisticated machine. The following information is given. Facts Existing Machine Proposed Machine Cost = $100,000 Cost = $150,000 Purchased 2 years ago Installation - $20,000 Depreciation using MACRS Over Depreciation-the MACRS a 5-year recover schedule 5-year recovery schedule will be used Current market value = $105,000 Five year usable life remaining Five year usable life expected Earnings before Depreciation and Taxes Existing Machine Proposed Machine Year 1 $160,000 Year 1 $170,000 2 150,000 2 170,000 3 140,000 3 170,000 4 140,000 4 170,000 5 140,000 5 170,000 The firm has determined its optimal capital structure, which is composed of the following sources and target market value proportions: Target Market Source of Capital Proportions 30% Long-term debt. Preferred Stock 15% Common Stock 55% Call us: +97(0/2)-2-2982000 E-mail: help@ritos Debt: The firm can sell a 20-year. $1,000 par valve, 7 percent bond for $940. A flotation cost of 2 percent of the lace value would be required in addition to the discount of $10. Preferred Stock. The firm has determined It can issue preferred stock at $65 per share par value. The stock will pay an $8.00 annual dividend. The flotation cost stock is $7 per share. Common Stock: The firm's common stock is currently selling for $50 per share. The dividend expected to be paid at the end of the coming year is $5.07. Its dividend payments have been growing at a constant rate for the last five years. Five years ago, the dividend was $3.45, a new common stock issue must be underpriced at $1 per shore and the firm must pay 53 per share in flotation costs. The firm pays 20 percent taxes on ordinary income and capital gains. Sanad invests $7,000 in NWC that will be recovered at the final year of the project. Calculate the book value of the existing asset being replaced Calculate the tax attect from the sale of the existing asset Calculate the initial investment required for the new one Calculate the incremental earnings before depreciation MacBook Air * 90 2 # 3 $ 4 % 5 & 7 OD + 6 9 2 V 9 0 W E 20 Y bi A A IS S DSF IK G Hij J Calculate the incremental depreciation in years 3 and 5. Calculate the incremental after-tax cash flow for years t = 2 through Calculate the final cash flow, if you know that the existing machine was fully deprecated and sold at $40,000, while the proposed machine sold at $190,000 after 4 years from the date of purchase Calculate the weighted average cost of capital assuming the firm has exhausted all red coming Che cost of debt Che cost of preferred stock MacBook Air * % & S 4 2 3 1 9 6 9 0 V 8 7 2 Q W E R Y S DSF Hi K K J 3 . IZ IX . CV | IN M Call us: +97(0/2) 2.2982000 E-mail: help ritops Calculate the cost of common stock the growth rate of common stock dividends Compute the payback period for these projects Compute the NPV? Compute the PIT Compute the EVA for the third year? Determine whether the replacement decision should be accepted or not? MacBook Air 13 # 3 $ 4 % 5 & 7 P V 2 1 9 8 T 0 6 7 A 2 Q W & R T Y U E lo S DSF A H G i . CYB IN M Call us: +970/21-2-2982000 Email: help ritops Debt: The firm can sell a 20-year $1,000 par valve, 7 percent bond for $990. A flotation cost of 2 percent of the lace value would be required in addition to the discount of $10. Preferred Stock. The firm has determined it can issue preferred stock at $65 per share par value. The stock will pay an $8.00 annual dividend. The flotation cost stock is $7 per share. Common Stock: The firm's common stock is currently selling for $50 per share. The dividend expected to be paid at the end of the coming year is $5.07. Its dividend payments have been growing at a constant rate for the last five years. Five years ago, the dividend was $3.45, a new common stock issue must be underpriced at $1 per shore and the firm must pay 53 per share in flotation costs The firm pays 20 percent taxes on ordinary income and capital gains. Sanad invests $7,000 in NWC that will be recovered at the final year of the project. Calculate the book value of the existing asset being replaced Calculate the tax attect from the sale of the existing asset. Calculate the initial investment required for the new set Calculate the incremental rings before depreciation MacBoo Air DO GOD 4 >> A $ 4 & 7 3 2 5 6 V 8 9 0 Q W E R Y Cei .. A IS S D F IK HTJ J Calculate the incremental depreciation in years 3 and 5. Calculate the incremental after-tax cash flow for years t = 2 thought Calculate the minal cash flow. If you know that the existing machine was fully deprecated and sold at $40.000 ile the proposed machine sold at $190,000 after 4 years from the date of purchase Calculate the weighted average cost of capital assuming the firm has exhausted all red coming Checa el debt Che cost of profeedstock MacBook Air See % & S 4 3 2 6 V 7 A 8 9 2 9 W E R Y IS DSF Hi K K J C IZ N CIV | IN !M Call us: +97(0/2) 2.29820009 Email: help tops Calculate the cost of common stock the growth rate of common stock dividends Compute the payback period for these projects Compute the NPV? Compute the PIT Compute the EVA for the third year? Determine whether the replacement decision should be accepted or not? MacBook Air BO 13 A # 3 $ 4 % 5 & 7 V 1 8 2 9 A 0 6 7 2 Q R $ W T Y U E lo S G A DSF 1 CYB i NM
