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 $26,900 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 is the IRR of the after-tax cash flows for each company?

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

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 $26,800 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...
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...
A project requires an initial investment in equipment of $100,000. The project is expected to produce...
A project requires an initial investment in equipment of $100,000. The project is expected to produce sales revenues of $120,000 for three years. Manufacturing costs are estimated to be 60% of the revenues. The assets are depreciated using straight-line depreciation. At the end of the project, the firm can sell the equipment for $10,000. The corporate tax rate is 30% and the cost of capital is 15%. What would the NPV if the discount rate were higher by 10% (10%...
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...
A project requires an initial investment of $300,000 and expects to produce an after-tax operating cash...
A project requires an initial investment of $300,000 and expects to produce an after-tax operating cash flow of $150,000 per year for three years. The asset value will be depreciated using straight-line depreciation over three years. At the end of the project, the asset could be sold for a price of $100,000. Assume a 21% tax rate and 15% cost of capital. Calculate the NPV of the project. Excel format please.
A project requires an initial investment of $200,000 and is expected to provide a single cash...
A project requires an initial investment of $200,000 and is expected to provide a single cash inflow of $350,000 after 5 years. What is the project’s internal rate of return?
A project requires an initial investment of $1.2 million. It expects to generate a perpetual cash...
A project requires an initial investment of $1.2 million. It expects to generate a perpetual cash flow. The first year cash flow is expected at $100,000. The cash flows are then expected to grow at 1.25% forever. The appropriate cost of capital for this project is 11%. What is the project's IRR and should it be accepted based on the IRR rule? Group of answer choices IRR is 11.6%; project should be accepted IRR is 11.6%; project should not be...
A project requires an initial investment of $2,200 and grants cash flows of $1,300 at the...
A project requires an initial investment of $2,200 and grants cash flows of $1,300 at the end of year 1, $ 950 at the end of year 2, $ 1,900 at the end of year 3 and $ 850 at the end of year 4. At a discount rate of 32%, calculate NPV and IRR. What decision should be made by the company? please provide me the answer as soon as possible
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT