Question

Summer Tyme, Inc., is considering a new 3-year expansion project that requires an initial fixed asset investment of $2.4 million. The fixed asset falls into the 3-year MACRS class (MACRS Table) and will have a market value of $189,000 after 3 years. The project requires an initial investment in net working capital of $270,000. The project is estimated to generate $2,160,000 in annual sales, with costs of $864,000. The tax rate is 35 percent and the required return on the project is 17 percent.

Answer #1

**Answer:**

Summer Tyme, Inc., is considering a new 3-year expansion project
that requires an initial fixed asset investment of $928725. The
fixed asset will be depreciated straight-line to 49027 over its
3-year tax life, after which time it will have a market value of
$116318. The project requires an initial investment in net working
capital of $43283. The project is estimated to generate $178575 in
annual sales, with costs of $119733. The tax rate is 0.33 and the
required return on...

Summer Tyme, Inc., is considering a new 3-year expansion project
that requires an initial fixed asset investment of $2,338,197. The
fixed asset will be depreciated straight-line to zero over its
3-year tax life, after which time it will be worthless. The project
is estimated to generate $2,093,051 in annual sales, with costs of
$1,748,698. If the tax rate is 0.28 , what is the OCF for this
project?

Summer Tyme, Inc., is considering a new 3-year expansion project
that requires an initial fixed asset investment of $760,833. The
fixed asset will be depreciated straight-line to 28,916 over its
3-year tax life, after which time it will have a market value of
$139,909. The project requires an initial investment in net working
capital of $47,049. The project is estimated to generate $168,205
in annual sales, with costs of $83,134. The tax rate is 0.22 and
the required return on...

Summer Tyme, Inc., is considering a new 3-year expansion project
that requires an initial fixed asset investment of $918,010. The
fixed asset will be depreciated straight-line to 56,208 over its
3-year tax life, after which time it will have a market value of
$124,620. The project requires an initial investment in net working
capital of $58,280. The project is estimated to generate $237,369
in annual sales, with costs of $155,599. The tax rate is 0.21 and
the required return on...

Summer Tyme, Inc., is considering a new 3-year expansion project
that requires an initial fixed asset investment of $2.916 million.
The fixed asset will be depreciated straight-line to zero over its
3-year tax life, after which time it will have a market value of
$226,800. The project requires an initial investment in net working
capital of $324,000. The project is estimated to generate
$2,592,000 in annual sales, with costs of $1,036,800. The tax rate
is 31 percent and the required...

Quad Enterprises is considering a new three-year expansion
project that requires an initial fixed asset investment of $2.41
million. The fixed asset falls into the three-year MACRS class
(MACRS schedule). 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 rate is 23...

Quad Enterprises is considering a new 3-year expansion project
that requires an initial fixed asset investment of $3.5 million.
The fixed asset falls into the 3-year MACRS class (MACRS Table) and
will have a market value of $268,800 after 3 years. The project
requires an initial investment in net working capital of $384,000.
The project is estimated to generate $3,072,000 in annual sales,
with costs of $1,228,800. The tax rate is 22 percent and the
required return on the project...

Quad Enterprises is considering a new 3-year expansion project
that requires an initial fixed asset investment of $2.5 million.
The fixed asset falls into the 3-year MACRS class (MACRS Table) and
will have a market value of $197,400 after 3 years. The project
requires an initial investment in net working capital of $282,000.
The project is estimated to generate $2,256,000 in annual sales,
with costs of $902,400. The tax rate is 21 percent and the required
return on the project...

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...

Hubrey Home Inc. is considering a new three-year expansion
project that requires an initial fixed asset investment of $3.8
million. The fixed asset falls into Class 10 for tax purposes (CCA
rate of 30 percent per year), and at the end of the three years can
be sold for a salvage value equal to its UCC. The project is
estimated to generate $2,640,000 in annual sales, with costs of
$835,000. If the tax rate is 35 percent, what is the...

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