Question

You are considering the following project. What is the expected cash flow for the last year (year 3)? This cash flow includes operating cash flow and terminal cash flow. Project life: 3 years Equipment: Cost: $20,000 Economic life: 3 years Salvage value: $4,000 Initial investment in net working capital: $2,000 Revenue: $13,000 in year 1, with a nominal growth rate of 6% per year Fixed cost: $3,000 in year 1 Variable cost: 30% of revenue Corporate tax rate (T): 40% WACC for the project: 10% This project does not create incidental effect.

a. $12,492.91

b. $12,315.76

c. $12,334.09

d. $12,470.09

e. $12,459.31

Answer #1

Cashflows of Year-3 | ||||

Revenue (13000 * (1.06)^2) | 14606.8 | |||

Less: Variable cost @30% | 4382.04 | |||

Less: Fixed cost | 3000 | |||

Less: Depreciation | 5333.33 | |||

(20000-4000)/3 | ||||

Net Income | 1891.43 | |||

less: Tax @ 40% | 756.57 | |||

After Tax Income | 1134.86 | |||

Add: Depreciation | 5333.33 | |||

Operating Cashflows | 6468.19 | |||

Salvage value of investment | 4000 | |||

Release of WC | 2000 | |||

Cashflows of Year-3 | 12468.19 | |||

Answer is d. 12470.09 | ||||

You are considering the following project. What is the expected
cash flow for the last year (year 3)? This cash flow includes
operating cash flow and terminal cash flow.
Project life: 3 years
Equipment:
Cost: $20,000
Economic life: 3 years
Salvage value: $4,000
Initial investment in net working capital: $2,000
Revenue: $13,000 in year 1, with a nominal growth rate of 6% per
year
Fixed cost: $3,000 in year 1
Variable cost: 30% of revenue
Corporate tax rate (T): 40%...

You are considering the following project. What is the NPV of
the project?
Project life: 3 years
Equipment:
Cost: $18,000
Economic life: 3 years
Salvage value: $4,000
Initial investment in net working capital: $2,000
Revenue: $13,000 in year 1, with a nominal growth rate of 5% per
year
Fixed cost: $3,000 in year 1
Variable cost: 30% of revenue
Corporate tax rate (T): 40%
WACC for the project: 10%
This project does not create incidental effect.

You are considering the following project. What is the NPV of
the project?
Project life: 3 years
Equipment:
Cost: $18,000
Economic life: 3 years
Salvage value: $4,000
Initial investment in net working capital: $2,000
Revenue: $13,000 in year 1, with a nominal growth rate of 5% per
year
Fixed cost: $3,000 in year 1
Variable cost: 30% of revenue
Corporate tax rate (T): 40%
WACC for the project: 10%
This project does not create incidental effect.
Select...

What is the terminal cash flow for the following two projects
with a life span of five years. The salvage value for project A is
$18,000 and project B is $20,000 and both have been depreciated
correctly. It is assumed that after the five years the assets will
be sold and the salvage value will be received. The initial outlay
for both projects is $715,000 which includes $90,000 change in net
working capital (so asset value is $625,000)
Project A...

Mega Dynamics is considering a project that has the following
cash flows:
Year
Project Cash Flow
0
?
1
$2,000
2
3,000
3
3,000
4
1,500
The project has an IRR of 17% . The firm's cost of capital is 11
percent. What is the project's net present value (NPV)?

You are considering a project
with the following set of cash flows:
Cash
flow
0
-5,500
1
2,000
2
3,000
3
1,000
4
2,000
a. What is
the payback period of this project? If the
pre-specified cut off is 3 years,
should this project be accepted?
b. What is
the discounted
payback period of this
project? If the
pre-specified cut off is 3 years, should this project be
accepted? The discount rate is
10%.

A project costs $4,000. You expect the following cash flows from
the project:
Year
Cash Flow
1
$2,000
2
$6,000
3
$4,000
4
$8,000
5
$9,000
If the required rate of return is 14%, what is the NPV of this
project?
Round your answer to two decimal places.

Shannon Industries is considering a project which has the
following cash flows:
Year Cash Flow
0 ?
1 $2,000
2 $3,000
3 $3,000
4 $1,500
The project has a payback period of 2 years. The
firm’s cost of capital is 12 percent. What is
the project’s net present value? (round your answer
to the nearest $1.)
a. $ 570
b. $ 730
c. $2,266
d. $2,761
e. $3,766

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Year
Project A
Project B
0
−$20,000
−$20,000
1
15,000
2,000
2
15,000
2,500
3
13,000
3,000
4
3,000
50,000
Calculate payback period for both projects.

1.
Beta Enterprises, Inc. is considering a project that has
the following cash flow and WACC data. What is the project's NPV?
Enter your answer rounded to two decimal places. Do not enter $ or
comma in the answer box. For example, if your answer is $12,300.456
then enter as 12300.46 in the answer box.
WACC:
14%
Year:
0
1
2
3
Cash flows:
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$500
$300
$400
2.
Delta Enterprises, Inc. has a WACC of 10% and is considering...

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