Finance FIll in the blank

1.value:

10.00 points

Parker & Stone, Inc., is looking at setting up a new manufacturing plant in South Park to produce garden tools. The company bought some land six years ago for $4.5 million in anticipation of using it as a warehouse and distribution site, but the company has since decided to rent these facilities from a competitor instead. If the land were sold today, the company would net $4.8 million. The company wants to build its new manufacturing plant on this land; the plant will cost $12.0 million to build, and the site requires $720,000 worth of grading before it is suitable for construction. What is the proper cash flow amount to use as the initial investment in fixed assets when evaluating this project? (Enter your answer in dollars, not millions of dollars, i.e. 1,234,567.)

Cash flow amount $

2.value:

10.00 points

Winnebagel Corp. currently sells 32,000 motor homes per year at $70,000 each, and 13,000 luxury motor coaches per year at $107,000 each. The company wants to introduce a new portable camper to fill out its product line; it hopes to sell 27,000 of these campers per year at $15,000 each. An independent consultant has determined that if Winnebagel introduces the new campers, it should boost the sales of its existing motor homes by 2,300 units per year, and reduce the sales of its motor coaches by 1,000 units per year. What is the amount to use as the annual sales figure when evaluating this project? (Enter your answer in dollars, not millions of dollars, i.e. 1,234,567.)

Annual sales $

3.value:

10.00 points

A proposed new investment has projected sales of $830,000. Variable costs are 65 percent of sales, and fixed costs are $172,000; depreciation is $73,000. Prepare a pro forma income statement assuming a tax rate of 34 percent. What is the projected net income? (Input all amounts as positive values.)

Sales $

Variable costs

Fixed costs

Depreciation

EBT $

Taxes

Net income $

4.value:

10.00 points

A proposed new project has projected sales of $123,000, costs of $57,000, and depreciation of $12,600. The tax rate is 35 percent. Calculate operating cash flow using the four different approaches.

Approaches Operating cash flow

EBIT + Depreciation – Taxes $

Top-down $

Tax-shield $

Bottom-up $

5.value:

10.00 points

Consider an asset that costs $616,000 and is depreciated straight-line to zero over its seven-year tax life. The asset is to be used in a five-year project; at the end of the project, the asset can be sold for $183,000. If the relevant tax rate is 34 percent, what is the aftertax cash flow from the sale of this asset?

Aftertax salvage value $

6.value:

10.00 points

Keiper, 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, after which time it will be worthless. The project is estimated to generate $2,110,000 in annual sales, with costs of $805,000. If the tax rate is 35 percent, what is the OCF for this project? (Enter your answer in dollars, not millions of dollars, i.e. 1,234,567.)

OCF $

7.value:

10.00 points

Keiper, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment of $2.73 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 $2,090,000 in annual sales, with costs of $785,000. The tax rate is 30 percent and the required return on the project is 13 percent. What is the project’s NPV? (Round your answer to 2 decimal places. (e.g., 32.16))

NPV $

8.value:

10.00 points

Dog Up! Franks is looking at a new sausage system with an installed cost of $530,000. This cost will be depreciated straight-line to zero over the project’s five-year life, at the end of which the sausage system can be scrapped for $80,000. The sausage system will save the firm $210,000 per year in pretax operating costs, and the system requires an initial investment in net working capital of $39,000. If the tax rate is 35 percent and the discount rate is 9 percent, what is the NPV of this project? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

NPV $

9.value:

10.00 points

Your firm is contemplating the purchase of a new $600,000 computer-based order entry system. The system will be depreciated straight-line to zero over its five-year life. It will be worth $64,000 at the end of that time. You will save $230,000 before taxes per year in order processing costs, and you will be able to reduce working capital by $79,000 (this is a one-time reduction). If the tax rate is 30 percent, what is the IRR for this project? (Round your answer to 2 decimal places. (e.g., 32.16))

IRR %

10.value:

10.00 points

Your firm is contemplating the purchase of a new $610,000 computer-based order entry system. The system will be depreciated straight-line to zero over its five-year life. It will be worth $66,000 at the end of that time. You will be able to reduce working capital by $81,000 (this is a one-time reduction). The tax rate is 35 percent and the required return on the project is 15 percent.

If the pretax cost savings are $206,000 per year, what is the NPV of this project? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

NPV $

If the pretax cost savings are $156,000 per year, what is the NPV of this project? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

NPV $

At what level of pretax cost savings would you be indifferent between accepting the project and not accepting it? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

Cost savings $