Question

1. A company is considering a 5-year project to open a new product line. A new machine with an installed cost of $120,000 would be required to manufacture their new product, which is estimated to produce sales of $40,000 in new revenues each year. The cost of goods sold to produce these sales (not including depreciation) is estimated at 49% of sales, and the tax rate at this firm is 27%. If straight-line depreciation is used to calculate annual depreciation, what is the estimated annual operating cash flow from this project each year? (Answer to the nearest dollar.)

2. A company is considering a 3-year project that requires an initial installed equipment cost of $15,000. The project engineer has estimated that the operating cash flows will be $5,000 in year 1, $7,000 in year 2, and $9,000 in year 3. The new machine will also require a parts inventory of $3,000 at the beginning of the project (assume this inventory can be sold for cost at the end of the project). It is also estimated that the equipment can be sold as salvage for an after tax salvage cash flow of $4,000 at the end of the project. If the tax rate is 27% and the required rate of return is 10%, what is the net present value (NPV) of this project? (Answer to the nearest dollar.)

3. A company is considering a 5-year project that opens a new product line and requires an initial outlay of $82,000. The assumed selling price is $98 per unit, and the variable cost is $68 per unit. Fixed costs not including depreciation are $17,000 per year. Assume depreciation is calculated using stright-line down to zero salvage value. If the required rate of return is 14% per year, what is the accounting break-even point? (Answer to the nearest whole unit.)

Answer #1

A company is considering a 5-year project to open a new product
line. A new machine with an installed cost of $120,000 would be
required to manufacture their new product, which is estimated to
produce sales of $40,000 in new revenues each year. The cost of
goods sold to produce these sales (not including depreciation) is
estimated at 49% of sales, and the tax rate at this firm is 27%. If
straight-line depreciation is used to calculate annual
depreciation, what...

21. A company is considering a 5-year project that opens a new
product line and requires an initial outlay of $85,000. The assumed
selling price is $97 per unit, and the variable cost is $61 per
unit. Fixed costs not including depreciation are $20,000 per year.
Assume depreciation is calculated using stright-line down to zero
salvage value. If the required rate of return is 11% per year, what
is the accounting break-even point? (Answer to the nearest whole
unit.)
22....

22.
A company is considering a 5-year project that opens a new
product line and requires an initial outlay of $80,000. The assumed
selling price is $93 per unit, and the variable cost is $66 per
unit. Fixed costs not including depreciation are $20,000 per year.
Assume depreciation is calculated using stright-line down to zero
salvage value. If the required rate of return is 10% per year, what
is the cash break-even point? (Answer to the nearest whole
unit.)

A company is considering a 5-year project to expand production
with the purchase of a new automated machine using the latest
technology. The new machine would cost $220,000 FOB St. Louis, with
a shipping cost of $4,000 to the plant location. Installation
expenses of $10,000 would also be required. This new machine would
be classified as 7-year property for MACRS depreciation purposes.
The project engineers anticipate that this equipment could be sold
for salvage for $48,000 at the end of...

International Paper is considering a new product launch. The
project will cost $630,000, have a 5-year life, and have no salvage
value; depreciation is straight-line to zero. Sales are projected
at 160 units per year, price per unit will be $24,000, variable
cost per unit will be $12,000, and fixed costs will be $283,000 per
year. The relevant tax rate is 35 percent. Based on your
experience, you think the unit sales, variable cost, and fixed cost
projections given here...

A company is considering a 5-year project to expand production
with the purchase of a new automated machine using the latest
technology. The new machine would cost $180,000 FOB St. Louis, with
a shipping cost of $7,000 to the plant location. Installation
expenses of $14,000 would also be required. This new machine would
be classified as 7-year property for MACRS depreciation purposes.
The project engineers anticipate that this equipment could be sold
for salvage for $41,000 at the end of...

14. Pendant Publishing is considering a new product line that
has expected sales of $1,100,000 per year for each of the next 5
years. New equipment that is required to produce the new product
will cost $1,200,000. The equipment has a useful life of 5 years
and a $300,000 salvage value and will be sold at the end of year 5
for its’ salvage value. Total variable costs of the product line
are $450,000 per year, total fixed costs (not...

Air Taxi, Inc. is considering a new 3-year expansion project
that requires an initial fixed asset investment of $1,129,000
million dollars. The asset will be depreciated over a 3 year tax
life and have no salvage value. The project is estimated to have
annual cash flows of $1,210,000 with a cost of $450,000. The tax
rate is 34% percent and the required rate of return is 14%
percent.
What is the project NPV?
Asset investment
$1,129,000
Estimated annual sales...

XYZ Company is considering whether a project requiring the
purchase of new equipment is worth investing. The cost of a new
machine is $340,000 including shipping and installation. The
project will increase annual revenues by $400,000 and annual costs
by $100,000. The machine will be depreciated via straight-line
depreciation for three years to a salvage value of $40,000. If the
firm does this project, $30,000 in net working capital will be
required. What is the annual cash flow of this...

XYZ Company is considering whether a project requiring the
purchase of new equipment is worth investing. The cost of a new
machine is $340,000 including shipping and installation. The
project will increase annual revenues by $400,000 and annual costs
by $100,000. The machine will be depreciated via straight-line
depreciation for three years to a salvage value of $40,000. If the
firm does this project, $30,000 in net working capital will be
required. What is the annual cash flow of this...

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