ABC is starting a new project. It will require new equipment costing 34. The project is expected to increase gross profits by 26 per year, starting at the end of the first year, with associated costs of 13 for each of those years. The machine is expected to have a working life of 7 years and will be depreciated over those 7 years. The marginal tax rate is 0.3. What are the incremental free cash flows associated with the new machine in year 2?

ABC is starting a new project. It will require new equipment costing 34. The project is expected to increase gross profits by 26 per year, starting at the end of the first year, with associated costs of 13 for each of those years. The machine is expected to have a working life of 7 years and will be depreciated over those 7 years. The marginal tax rate is 0.3. What are the incremental free cash flows associated with the new machine in year 2?

Name: ABC is starting a new project. It will require newequipment costing 3
Uploaded: 2024-03-20T06:50:59.000Z
Channel: Bartleby
Description: ABC is starting a new project. It will require newequipment costing 34. The project is expected to increasegross profits by 26 per year, starting at the end of the firstyear, with associated costs of 13 for each of those years.The machine is expecte

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 5PA: Falkland, Inc., is considering the purchase of a patent that has a cost of $50,000 and an estimated...

See similar textbooks

Similar questions

Your company is planning to purchase a new log splitter for is lawn and garden business. The new splitter has an initial investment of $180,000. It is expected to generate $25,000 of annual cash flows, provide incremental cash revenues of $150,000, and incur incremental cash expenses of $100,000 annually. What is the payback period and accounting rate of return (ARR)?
Falkland, Inc., is considering the purchase of a patent that has a cost of $50,000 and an estimated revenue producing life of 4 years. Falkland has a cost of capital of 8%. The patent is expected to generate the following amounts of annual income and cash flows: A. What is the NPV of the investment? B. What happens if the required rate of return increases?
Growth Enterprises believes its latest project, which will cost $82,000 to install, will generate a perpetual growing stream of cash flows. Cash flow at the end of the first year will be $7,000, and cash flows in future years are expected to grow indefinitely at an annual rate of 5%. a. If the discount rate for this project is 10%, what is the project NPV? (Do not round intermediate calculations.) NPV b. What is the project IRR? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) IRR < Prev 2 of 8 Next search 長
Growth Enterprises believes its latest project, which will cost $82,000 to install, will generate a perpetual growing stream of cash flows. Cash flow at the end of the first year will be $7,000, and cash flows in future years are expected to grow indefinitely at an annual rate of 5%. a. If the discount rate for this project is 10%, what is the project NPV? Note: Do not round intermediate calculations. NPV b. What is the project IRR? Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. IRR %
JFINEX Corporation is considering a new project that will cost 165,000. It is expected to generate cash flows over the next three years in the amounts of +150,000 in year one, -20,000 in year two, and +80,000 in year three. The required rate of return is 7%. What is the payback period of this project?" 1.75 years 2.44 years 3.0 years 2.65 years None of the above
An investment project has expected cash flows as shown below. The required rate of return for the project is 11.8%. What is the project's net present value (NPV)? Assume that the cash flows after year 0 occur at the end of each year. Year 0 cash flow= -91,000 Year 1 cash flow=21,000 Year 2 cash flow= 40,000 Year 3 cash flow= 43,000 Year 4 cash flow= 55,000 Year 5 cash flow= 19,000
Salt Lake Potash is considering a project with the following cash flows. An initial investment of $1.025bn is required for the project. The discount rate is 9%. The company wants to calculate how long it would take investors to recover their initial investment. The company does not want to ignore the effects of time value of money and the discount rate. Year O CF ($mn) -$1,025 1.83 years 2.26 years What is your best estimate of the time to recovery? $159.79mn 1 2 $650 $450 19.9% 3 $250 4 $50
Starwood Ltd is considering to invest in a new project. The project is expected to generate cash flows of $1,000 every four years forever with the first cash flow starting in year 2 and $4,000 every four years forever with the first cash flow starting in year 4. Suppose similar investments are paying a return of 10% p.a. compounded quarterly. How much should Starwood Ltd be prepared to pay for this project?
Wayne Company is considering a long-term investment project called ZIP. ZIP will require an investment of $137,956. It will have a useful life of 4 years and no salvage value. Annual cash inflows would increase by $79,900, and annual cash outflows would increase by $42,000. Compute the cash payback period. (Round answer to 2 decimal places, e.g. 10.52.) Cash payback period _________? enter the Cash payback period in years rounded to 2 decimal places years.
Blossom Company is considering a long-term investment project called ZIP. ZIP will require an investment of $132,940. It will have a useful life of 4 years and no salvage value. Annual cash inflows would increase by $80,600, and annual cash outflows would increase by $41,500. Compute the cash payback period. (Round answer to 2 decimal places, e.g. 10.52.) Cash payback period years.
ABC Company is evaluating a project that can generate the following revenues: P4,600 in year one, P5,200 in year two, P5,900 in year three and lastly P5,700 in year four. The company has a required rate of return for 12% compounded semi-annually. 1.What will be the future values of these cash flows at the end of year four? 2.What will be the future value of 5700 at the end of 4 years? 3.What will be the future value of 4600 at the end of 4 years? 4.What will be the future value of 5200 at the end of 4 years? 5.What will be the future value of 5900 at the end of 4 years?
Growth Enterprises believes its latest project, which will cost $80,000 to install, will generate a perpetual growing stream of cash flows. Cash flow at the end of the first year will be $6,000, and cash flows in future years are expected to grow indefinitely at an annual rate of 5%.. a. If the discount rate for this project is 10%, what is the project NPV? Note: Do not round intermediate calculations. Answer is complete and correct. NPV $ 40,000 b. What is the project IRR? Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. IRR Answer is complete but not entirely correct. 0.00%