Can you please show me HOW to solve these? I will award the points to anyone who
ID: 2632969 • Letter: C
Question
Can you please show me HOW to solve these? I will award the points to anyone who can help me. Thank you...
1) A 6-year project has an initial fixed asset investment of $42,840, an initial NWC investment of $4,080, and an annual OCF of -$65,280. The fixed asset is fully depreciated over the life of the project and has no salvage value. If the required return is 14 percent, what is the project's equivalent annual cost, or EAC? (Do not round calculations.) 2) Your firm is contemplating the purchase of a new $772,800 computer-based order entry system. The system will be depreciated straight-line to zero over its 5-year life. !twill be worth $69,000 at the end of that time. You will save $303,600 before taxes per year in order processing costs and you will be able to reduce working capital by $70,270 (this is a one-time reduction). If the tax rate is 30 percent, what is the IRR for this project? (Do not round calculations.) 3) Parker & Stone, Inc, is looking at setting up a new manufacturing plant in South Park to produce garden tools. The company bought some land4 years ago for $6 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 $10 million. The company wants to build its new manufacturing plant on this land; the plant will cost $13.2 million to build, and the site requires $1,500,000worth of grading before it is suitable for construction. What is the proper cash flow a mount to use as the initial investment in fixed assets when evaluating this project? 4) A proposed new project has projected sales of $95,200, costs of $48,160, and depredation of $3,360. The tax rate is 32 percent. Calculate operating cash flow using the four different approaches. (a) The common calculation Approach (Do not round your intermediate calculations): (b) The Bottom-Up Approach (Do not round your intermediate calculations): (c) The Top-Down Approach (Do not round your intermediate calculations): (d) The Tax-Shield Approach (Do not round your intermediate calculations):Explanation / Answer
3.
The $6 million acquisition cost of the land 4 years ago is a sunk cost. The $10
million current after-tax value of the land is an opportunity cost if the land is used
rather than sold off. The $13.2 million cash outlay and $1500000 grading expenses
are the initial fixed asset investments needed to get the project going.
Therefore, the proper year zero cash flow to use in evaluating this project is
10000000+13200000 +1500000= $24700000