Question

A project requires an initial investment of $100,000 and is expected to produce a cash inflow...

A project requires an initial investment of $100,000 and is expected to produce a cash inflow before tax of $26,800 per year for five years. Company A has substantial accumulated tax losses and is unlikely to pay taxes in the foreseeable future. Company B pays corporate taxes at a rate of 21% and can claim 100% bonus depreciation on the investment. Suppose the opportunity cost of capital is 10%. Ignore inflation.

a. Calculate project NPV for each company. (Do not round intermediate calculations. Round your answers to the nearest whole dollar amount.)

Company A:?

Company B:?


b. What is the IRR of the after-tax cash flows for each company? (Do not round intermediate calculations. Enter your answers as a percent rounded to 1 decimal places.)

Company A:?%

Company B:?%

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

EXCEL FORMULA:

FEEL FREE TO ASK DOUBTS... PLEASE RATE MY ANSWER

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
A project requires an initial investment of $100,000 and is expected to produce a cash inflow...
A project requires an initial investment of $100,000 and is expected to produce a cash inflow before tax of $27,500 per year for five years. Company A has substantial accumulated tax losses and is unlikely to pay taxes in the foreseeable future. Company B pays corporate taxes at a rate of 21% and can claim 100% bonus depreciation on the investment. Suppose the opportunity cost of capital is 10%. Ignore inflation. 1. Calculate project NPV for each company. (Do not...
A project requires an initial investment of $100,000 and is expected to produce a cash inflow...
A project requires an initial investment of $100,000 and is expected to produce a cash inflow before tax of $27,200 per year for five years. Company A has substantial accumulated tax losses and is unlikely to pay taxes in the foreseeable future. Company B pays corporate taxes at a rate of 21% and can claim 100% bonus depreciation on the investment. Suppose the opportunity cost of capital is 10%. Ignore inflation. a. Calculate project NPV for each company. (Do not...
A project requires an initial investment of $100,000 and is expected to produce a cash inflow...
A project requires an initial investment of $100,000 and is expected to produce a cash inflow before tax of $26,900 per year for five years. Company A has substantial accumulated tax losses and is unlikely to pay taxes in the foreseeable future. Company B pays corporate taxes at a rate of 21% and can claim 100% bonus depreciation on the investment. Suppose the opportunity cost of capital is 10%. Ignore inflation. a. Calculate project NPV for each company. b. What...
Will rate, thank you. Part 1: A project requires an initial investment of $100,000 and is...
Will rate, thank you. Part 1: A project requires an initial investment of $100,000 and is expected to produce a cash inflow before tax of $27,500 per year for five years. Company A has substantial accumulated tax losses and is unlikely to pay taxes in the foreseeable future. Company B pays corporate taxes at a rate of 34% and can depreciate the investment for tax purposes using the five-year MACRS tax depreciation schedule. Suppose the opportunity cost of capital is...
An investment requires an outlay of $100,000 today. Cash inflow from the investment are expected to...
An investment requires an outlay of $100,000 today. Cash inflow from the investment are expected to be $40,000 per year at the end of year 4, 5, 6, 7, and 8. You require a 20% rate of return on this type of investment. Answer the following questions and explain the formula for each question: First draw the time line and specify the cash outflow and inflow for each period. Calculate the net present value. Calculate the Internal rate of return...
Quad Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment...
Quad Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2.41 million. The fixed asset qualifies for 100 percent bonus depreciation in the first year. The project is estimated to generate $1,775,000 in annual sales, with costs of $672,000. The project requires an initial investment in net working capital of $380,000, and the fixed asset will have a market value of $375,000 at the end of the project.    a. If the tax...
Quad Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment...
Quad Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2.29 million. The fixed asset qualifies for 100 percent bonus depreciation in the first year. The project is estimated to generate $1,790,000 in annual sales, with costs of $684,000. The project requires an initial investment in net working capital of $410,000, and the fixed asset will have a market value of $420,000 at the end of the project.    a.   If the tax...
PROJECT A PROJECT B Initial Outlay minus−​$5000050,000minus −​$7000070,000 Inflow year 1      1200012,000      1300013,000 Inflow year 2     ...
PROJECT A PROJECT B Initial Outlay minus−​$5000050,000minus −​$7000070,000 Inflow year 1      1200012,000      1300013,000 Inflow year 2      1200012,000      1300013,000 Inflow year 3      1200012,000      1300013,000 Inflow year 4      1200012,000      1300013,000 Inflow year 5     12 00012,000      1300013,000 Inflow year 6     12 00012,000      1300013,000 ​(​NPV, ​PI, and IRR calculations​) You are considering two independent​ projects, project A and project B. The initial cash outlay associated with project A is ​$50 comma 000​, and the initial cash outlay associated with project B is ​$70 comma...
Quad Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment...
Quad Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2.27 million. The fixed asset qualifies for 100 percent bonus depreciation in the first year. The project is estimated to generate $1,800,000 in annual sales, with costs of $692,000. The project requires an initial investment in net working capital of $430,000, and the fixed asset will have a market value of $450,000 at the end of the project. a. If the tax rate...
Quad Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment...
Quad Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2.27 million. The fixed asset qualifies for 100 percent bonus depreciation in the first year. The project is estimated to generate $1,800,000 in annual sales, with costs of $692,000. The project requires an initial investment in net working capital of $430,000, and the fixed asset will have a market value of $450,000 at the end of the project. a. If the tax rate...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT