Question

Company ABC is considering a new 5-year investment into new
production equipment that requires initial investment € 4 million.
The project is expected to generate € 1.4 million in annual sales,
with costs of € 0.5 million per year for next 5 years. ABC uses the
straight-line depreciation over the 5 years of project life (book
value assumed to be zero at the end of the project).

If ABC uses the straight-line depreciation over the 5 years of
project life (book value assumed to be zero at the end of the
project) how large is the annual depreciation? Express your answer
in millions of euros.

If the tax rate is 35%. What is the annual operating cash flow of
the project? Express your answer in millions of euros.

If the project do not require any net working capital and the
required return of the project is 8%. What is the project’s NPV?
Express your answer in millions of euros. (Tax Rate 35%)

Answer #1

Company ABC is considering a new 5-year investment into new
production equipment that requires initial investment € 4 million.
The project is expected to generate € 1.4 million in annual sales,
with costs of € 0.5 million per year for next 5 years. ABC uses the
straight-line depreciation over the 5 years of project life (book
value assumed to be zero at the end of the project).
If ABC uses the straight-line depreciation over the 5 years of
project life...

Company ABC is considering a new 5-year investment into new
production equipment that requires initial investment € 5 million.
The project is expected to generate € 1.4 million in annual sales,
with costs of € 0.6 million per year for next 5 years. ABC uses the
straight-line depreciation over the 5 years of project life (book
value assumed to be zero at the end of the project).
If the tax rate is 35%. What is the annual operating cash flow...

Cochrane, Inc., is considering a new three-year expansion
project that requires an initial fixed asset investment of $2.1
million. The fixed asset will be depreciated straight-line to zero
over its three-year tax life, after which time it will be
worthless. The project is estimated to generate $2,150,000 in
annual sales, with costs of $1,078,327.
Required:
If the tax rate is 35 percent, what is the OCF for this project?
(Do not include the dollar sign ($). Enter your answer in...

Quad Enterprises is considering a new three-year expansion
project that requires an initial fixed asset investment of $2.29
million. The fixed asset will be depreciated straight-line to zero
over its three-year tax life, after which time it will be
worthless. The project is estimated to generate $1,715,000 in
annual sales, with costs of $625,000. The tax rate is 21 percent
and the required return on the project is 10 percent. What is the
project’s NPV? (Do not round intermediate
calculations....

ABC, Inc. is considering a new project requiring a $270,000
initial investment in equipment having a useful life of 3 years
with zero expected salvage value. The investment will produce
$220,000 in annual revenues and $180,000 in annual costs. Assume a
tax rate of 30% and straight-line depreciation. What is the
operating cash flow per year?
$118,000
$67,000
$91,000
$69,000
$55,000

Quad Enterprises is considering a new 5-year expansion project
that requires an initial fixed asset investment of $3.888 million.
The fixed asset will be depreciated straight-line to zero over its
5-year tax life, after which time it will be worthless. The project
is estimated to generate $3,456,000 in annual sales, with costs of
$1382,400.
If the tax rate is 24 percent, what is the OCF for this
project?

Quad Enterprises is considering a new three-year expansion
project that requires an initial fixed asset investment of $2.31
million. The fixed asset will be depreciated straight-line to zero
over its three-year tax life, after which time it will be
worthless. The project is estimated to generate $1,657,000 in
annual sales, with costs of $633,000. If the tax rate is 25
percent, what is the OCF for this project? (Do not round
intermediate calculations and enter your answer in dollars, not...

Quad Enterprises is considering a new three-year expansion
project that requires an initial fixed asset investment of $2.32
million. The fixed asset will be depreciated straight-line to zero
over its three-year tax life, after which time it will be
worthless. The project is estimated to generate $1,660,000 in
annual sales, with costs of $635,000. If the tax rate is 21
percent, what is the OCF for this project? (Do not round
intermediate calculations and enter your answer in dollars, not...

Cochrane, Inc., is considering a new three-year expansion
project that requires an initial fixed asset investment of $2.1
million. The fixed asset will be depreciated straight-line to zero
over its three-year tax life, after which time it will be
worthless. The project is estimated to generate $2,150,000 in
annual sales, with costs of $1,140,000. Assume the tax rate is 35
percent and the required return on the project is 14 percent.
Required:
What is the project’s NPV? (Do not include...

Quad Enterprises is considering a new 3yr expansion project that
requires an initial fixed asset investment of $2.4 million. The
fixed asset will be depreciated straight-line to zero over its 3yr
life after which it will be worthless. The project is estimated to
generate $2,550,000 in annual sales, with operating costs of
$1,180,000, not including depreciation cost. If the tax rate is
35%, what is the annual operating cash flow for this project?

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