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solution.
1. XYZ is evaluating the Reno project. The project would require an initial investment of $149,000 that would be depreciated to $15,400 over 6 years using straight-line depreciation. The project is expected to have operating cash flows of $51,300 per year forever. XYZ expects the project to have an after-tax terminal value of $348,000 in 3 years. The tax rate is 30%. What is (X+Y)/Z if X is the project’s relevant expected cash flow in year 3, Y is the project’s relevant expected cash flow in year 5, and Z is the project’s relevant expected cash flow in year 2?
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A number equal to or greater than 7.28 but less than 9.39 Save your time - order a paper!Get your paper written from scratch within the tight deadline. Our service is a reliable solution to all your troubles. Place an order on any task and we will take care of it. You won’t have to worry about the quality and deadlines Order Paper Now |
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A number equal to or greater than 9.39 but less than 11.92 |
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A number less than 7.28 or a rate greater than 15.69 |
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A number equal to or greater than 11.92 but less than 13.79 |
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A number equal to or greater than 13.79 but less than 15.69 |
2. XYZ operates indoor tracks. The firm is evaluating the Santa Fe project, which would involve opening a new indoor track in Santa Fe. During year 1, XYZ would have total revenue of $171,000 and total costs of $76,000 if it pursues the Santa Fe project, and the firm would have total revenue of $155,000 and total costs of $72,100 if it does not pursue the Santa Fe project. Depreciation taken by the firm would be $75,200 if the firm pursues the project and $35,700 if the firm does not pursue the project. The tax rate is 45.50%. What is the relevant operating cash flow (OCF) for year 1 of the Santa Fe project that XYZ should use in its NPV analysis of the Santa Fe project?
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$30,933.00 (plus or minus $1) |
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$43,400.00 (plus or minus $1) |
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$24,567.00 (plus or minus $1) |
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$18,833.00 (plus or minus $1) |
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None of the above is within $1 of the correct answer |
3. What is the expected after-tax cash flow from selling a piece of equipment if XYZ purchases the equipment today for $89,800.00, the tax rate is 23.00%, the equipment is sold in 2 years for $16,600.00, and MACRS depreciation is used where the depreciation rates in years 1, 2, 3, and 4 are 40.00%, 35.00%, 20.00%, and 5.00%, respectively?
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$23,796 (plus or minus $10) |
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$12,782 (plus or minus $10) |
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$17,946 (plus or minus $10) |
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$17,286 (plus or minus $10) |
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None of the above is within $10 of the correct answe |
4. XYZ is considering a project that would last for 3 years and have a cost of capital of 19.10 percent. The relevant level of net working capital for the project is expected to be $2,179.50 immediately (at year 0); $4,610.00 in 1 year; $15,200.00 in 2 years; and $0.00 in 3 years. Relevant expected revenue, costs, depreciation, and cash flows from capital spending in years 0, 1, 2, and 3 are presented in the following table. The tax rate is 49.00 percent. What is the net present value of this project? .
| Year 0 | Year 1 | Year 2 | Year 3 | |
|---|---|---|---|---|
| Revenue | $ 0.00 | $13,500.00 | $13,700.00 | $10,700.00 |
| Costs | $ 0.00 | $3,960.00 | $3,580.00 | $2,700.00 |
| Depreciation | $ 0.00 | $2,450.00 | $2,250.00 | $2,700.00 |
| Cash flows from capital spending | $-7,550.00 | $1,170.00 | $ 640.00 | $3,700.00 |
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$6091.98 (plus or minus $10) |
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$10018.32 (plus or minus $10) |
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$850.49 (plus or minus $10) |
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$11469.45 (plus or minus $10) |
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None of the above is within $10 of the correct answer |
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