Question

Show excel formulas if used. If possible can you make calculations in blue and solution in red

1. Harry Harrison has purchased a certificate of deposit (CD) from his bank that pays an annual interest rate of 2.50% compounded daily. What is the effective annual rate (EAR) on this CD?

2. Arbor Corporation is considering a new three-year expansion project that requires an initial fixed asset investment of $280,000. The fixed asset will be depreciated straight-line to zero over its three-year tax life, after which time it will have no market value. The project is expected to generate $292,000 in annual sales. Variable costs are 40% of sales and fixed costs are projected to be $31,700 per year. Assume no change in net working capital (NWC) due to the project. If the tax rate is 21% and the hurdle rate is 15%, what is the project's NPV?

Answer #1

1.

Compute the effective annual rate (EAR), using the equation as shown below:

EAR = {(1 + Rate/ Compounding period)^Compounding period} – 1

= {(1 + 0.025/365)^365} – 1

= {(1 + 0.0000068193155)^365} – 1

= 1.02531424247 – 1

= 2.531424247%

Hence, the EAR is 2.531424247%.

ITS AN EXCEL PROBLEM, PLEASE ATTACH SCREENSHOT OF EXCEL OR
EXPLAIN THE EXCEL FORMULAS YOU USED
Suppose a company is about to start
the following project, where all the dollar figures are in
thousands of dollars. In year 0, the project requires a fixed cost
of $12,000. The fixed costs is depreciated on the straight-line
basis over five years, and there is a salvage value of $1,500 in
year 5. The sales generated in years 1-5 are estimated to be...

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 estimated to generate 1.735 million in
annual sales, with costs of 650,000. The tax rate is 21 percent and
the required return on the project is 12 percent. What is the
project's NPV?

Blue Ribbon, Inc., is considering a new two-year expansion
project that requires an initial fixed asset investment of $3
million. The fixed asset actually falls into the three-year MARCRS
class (as shown in the Table below). Suppose that at the end of the
project, the fixed asset will have a market value of $2 million.
The project is estimated to generate $4 million in annual sales,
with costs of $2 million. The project also requires an initial
investment in net...

Quad Enterprises is considering a new three-year expansion
project that requires an initial fixed asset investment of $2.52
million. The fixed asset will be depreciated straight-line to zero
over its three-year tax life and is estimated to have a market
value of $294584 at the end of the project. The project is
estimated to generate $2146553 in annual sales, with costs of
$809789. The project requires an initial investment in net working
capital of $360133. If the tax rate is...

Quad Enterprises is considering a new three-year expansion
project that requires an initial fixed asset investment of $2.67
million. The fixed asset will be depreciated straight-line to zero
over its three-year tax life and is estimated to have a market
value of $297260 at the end of the project. The project is
estimated to generate $2043001 in annual sales, with costs of
$843186. The project requires an initial investment in net working
capital of $374861. If the tax rate is...

quad enterprises is considering a new three-year expansion
project that requires an initial fixed asset investment of 2.38
million.The fixed asset qualifies for 100 percent bonus
depreciation in the first year. The project is estimated to
generate 1,805,000 in annual sales, with costs of 696,000. The
project requires an initial investment in net working capital of
444,000, and the fixed asset will have a market value of 465,000 at
the end of the project.
a. If the tax rate is...

Down Under Boomerang, Inc., is considering a new three-year
expansion project that requires an initial fixed asset investment
of $2.79 million. The fixed asset will be depreciated straight-line
to zero over its three-year tax life. The project is estimated to
generate $2,110,000 in annual sales, with costs of $805,000. The
tax rate is 35 percent and the required return is 12 percent. The
project requires an initial investment in net working capital of
$330,000, and the fixed asset will have...

Down Under Boomerang, Inc. is considering a new three-year
expansion project that requires an initial fixed asset investment
of $1.65 million. The fixed asset will be depreciated straight=line
to zero over its three-year tax life, after which it will be
worthless. The project is estimated to generate $1.24 million in
annual sales, with costs of $485,000. The tax rate is 35% and the
required rate of return in 12%. What is the project's NPV?
*** I NEED SOME HELP WITH...

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 $1,810,000 in
annual sales, with costs of $720,000. The tax rate is 25 percent
and the required return on the project is 13 percent. What is the
project's NPV? (Do not round intermediate calculations....

H. Cochran Enterprises is considering a new three-year expansion
project that requires an initial fixed asset investment of $2.34
million. The fixed asset qualifies for 100 percent bonus
depreciation in the first year. The project is estimated to
generate $1,740,000 in annual sales, with costs of $644,000. The
project requires an initial investment in net working capital of
$310,000, and the fixed asset will have a market value of $270,000
at the end of the project.
a. If the tax...

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 12 minutes ago

asked 16 minutes ago

asked 31 minutes ago

asked 31 minutes ago

asked 48 minutes ago

asked 48 minutes ago

asked 50 minutes ago

asked 55 minutes ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago