A company is planning to invest $100,000 (before tax) in a personnel training program. The $100,000 outlay will be charged off as an expense by the firm this year (year 0). The returns from the program in the form of greater productivity and a reduction in employee turnover are estimated as follows (on an after-tax basis): Years 1–10: $10,000 per year Years 11-20: $22,000 per year The company has estimated its cost of capital to be 12 percent. Assume that the entire $100,000 is paid at time 0 (the beginning of the project). The marginal tax rate for the firm is 40 percent. Should the firm undertake the training program? Why or why not?
Q: A Corporation is considering to open an office in a new market area that would allow it to increase…
A: Formulas:
Q: A company is planning to invest $75,000 (before taxes) in a personnel training program. The $75,000…
A: Net Present Value= Present Value less Initial Outflow
Q: What is the payback period for the new machine
A: Payback Period: It is the period in which the initial outlay of an investment or equipment is…
Q: Toselli Animation plans to offer its employees a salary enhancement package that has revenue sharing…
A: Equivalent annual worth means the annual value of the cash flow which has been made today or the…
Q: Hayward Enterprises, a successful imaging products firm, is considering expanding into the lucrative…
A: Operating costs are the ongoing expenses incurred from the normal day-to-day operations of a…
Q: An company uses a technology which it purchased for $15 million. Operating costs are $2 million per…
A: IRR stands for internal rate of return and refers to a method that is used for analyzing the…
Q: The Best Manufacturing Company is considering a new investment. Financial projections for the…
A: Capital budgeting: It is a method of evaluating the projects which required huge investments and…
Q: A company is planning to invest $75,000 (before taxes) in a personnel training program. The $75,000…
A: Net present value =Present value of cash inflows -Present value of cash outflows If the Net present…
Q: Your firm is contemplating the purchase of a new $595,000 computer-based order entry system. The…
A: Here, Initial Investment is $595,000 Salvage Value of is $81,000 Savings before taxes every year is…
Q: The Fleming Manufacturing Company is considering a new investment. Financial projections for the…
A: Explanation : NPV of the project is help for taking the decision for accept the project / reject the…
Q: Wrangler Western has some of its jeans stone-washed under a contract with an independent contractor,…
A: Present Value of annuity = Annuity1+interest raten Present worth in Year 0 = Sum of present…
Q: One of your company's managers says that a $120,000 piece of machinery will be paid off in 12 months…
A: When the timing of cash flows differs, it is important to compute the present value of these cash…
Q: A firm with a 34% combined federal/state tax rate is considering purchasing equipment that falls in…
A: Depreciation rates from 5 years MACRS depreciation table: Year 1 Year 2 Year 3 Year 4 Year 5…
Q: templating the purchase of a new $545,000 computer-based order entry system. The system will be…
A: IRR is a rate where present value of cashinfows is equal to present value of cashoutflows.
Q: Build Corporation wants to purchase a new machine for $287,000. Management predicts that the machine…
A: Payback Period: The payback period of an investment is the length of time required for the…
Q: Brooke Remming is the Chief Executive Officer of Dundem Corp. The board of directors has agreed to…
A: Treasury stock is the issued outstanding stock which is bought back by the issuing company resulting…
Q: The Glass division has a budgeted net profit before tax of R4 200 000 per annum based on net capital…
A:
Q: Your firm is contemplating the purchase of a new $575,000 computer-based order entry system. The…
A: Internal Rate of Return or IRR is used in deciding range of discount rates or WACC up to which…
Q: The ABC Company CFO is considering leasing equipment rather than purchasing new equipment. The…
A: “Since you have posted a question with multiple sub-parts, we will solve first three subparts for…
Q: Pique Corporation wants to purchase a new machine for $378,000. Management predicts that the machine…
A: Present payback period is also known as the discounted payback period. It is calculated as the…
Q: Hemisphere, LLC is planning to outsource its 51-person information technology (IT) department to…
A: Present Value: The present value is the value of the sum received at time 0 or the current period.…
Q: A certain company pays a bonus to each engineer at the end of each year based on the company’s…
A: Total bonus paid per year = Number of engineers * Annual bonus per engineer = $3000 * 6 = $18000…
Q: Pique Corporation wants to purchase a new machine for $290,000. Management predicts that the machine…
A: Formula for calculation Net Present Value is:
Q: The Best Manufacturing Company is considering a new investment. Financial projections for the…
A: Net present value (NPV) is the value of all the cash flow of the investment (positive and negative)…
Q: The Fleming Manufacturing Company is considering a new investment. Financial projections for the…
A: Net present value (NPV) is used to determine the present value of all future cash flows. Net present…
Q: Wrangler Western has some of its jeans stone-washed under a contract with an independent contractor,…
A: The present worth of the machine is operating cost is the present value of all future cash outflow
Q: Antonio Melton, the chief executive officer of Thornton Corporation, has assembled his top advisers…
A: Net Present Value=(Present Value of Cash Inflows-Present Value of Cash Outflows)
Q: rate is 30% and the after-tax cash flow from sale of the property at the end of year 10 is expected…
A: The process through which a company evaluates possible big projects or investments is known as…
Q: Manalo Inc. had the following data for 2019 (in millions). The new CFO believes that the company…
A: GIVEN NWC and CCC up to the benchmark companies' level without affecting either sales or the costs…
Q: Compute the projected after-tax operating cash flow for Steber during the coming year.
A: Operating Cash Flow: These are cash flows of the firm generated from the normal operations. These…
Q: You are asked to evaluate the following project for a corporation with profitable ongoing…
A: Net present value is the value of cash inflows earned from a project after deducting the value of…
Q: Your firm is contemplating the purchase of a new $575,000 computer-based order entry system. The…
A: Savings before tax = $ 176,000 Purchase Price = $ 575,000 Tax Rate = 23% Salvage Value = $60,000…
Q: Your firm is contemplating the purchase of a new $605,000 computer-based order entry system. The…
A: Internal Rate of Return : It show the how much on investment amount project will return and it also…
Q: By the end of this year, the total payroll expenditure of a small engineering consulting firm is…
A: Salary will be increased by 6 % p.a. Future worth will be calculated by discounting the value of…
Q: National Co. has the opportunity to increase its annual sales by P125,000 by selling to a new,…
A: Manufacturing and selling expense = 125,000 x 70% = 87,500 Uncollectible expense = 125,000 x 10% =…
Q: In conducting an EVA analysis for year two for a newly introduced product line, Bethune, Inc., which…
A: Computation:
Q: With a $100,000 investment in a new injection moulding machine, A-Design Inc., a company specialized…
A: The payback period is the span of time necessary to repay the cost of an investment. Simply…
Q: A company with $795,000 in operating assets is considering the purchase of a machine that costs…
A: Payback period = Machine initial cost/Annual reduction in cost
Q: Steber Packaging, Inc., expects sales next year of $50 million. Of this total, 40 percent is…
A: Operating expenses=$25millionAccelerated Depreciation=10millionMarginal tax rate=34%
Q: As the director of a construction firm, you are considering buying a new cement mixing truck for…
A: Particulars Year 1 Year 2 Year 3 Year 4 Year 5 Operating cost $2,300 $2,300 $2,300 $2,300 $2,300…
Q: A company is developing a new product. The development of the product requires an initial investment…
A: Required Return = 7% Cash Flows: Year Cash Flows 0 -150,000 1 -70,000 2 -40,000 3 20,000…
Q: Compute the projected after-tax operating cash flow for Steber during the coming year. E
A: Operating Cash Flows: Operating cash flows represent the cash generated by the firm from its normal…
Q: You are an employee of University Consultants, Limited, and have been given the following…
A: Debt coverage ratio = ( Net Operating income / Debt Service)
Q: Hebner Housing Corporation has forecast the following numbers for this upcoming year: Sales =…
A: Income statement or statement of profit or loss helps investors to get to known about the total…
Q: Toselli Animation plans to offer its employees a salary enhancement package that has revenue sharing…
A: Annual worth distributes present worth into equivalent uniform value over its useful life.
Q: Steber Packaging Inc. expects sales next year of $42 million. Of this total, 40 percent is expected…
A: The annual cash expenditures and inflows associated with a project are represented by net cash flow.…
Trending now
This is a popular solution!
Step by step
Solved in 5 steps with 2 images
- A company is planning to invest $75,000 (before taxes) in a personnel training program. The $75,000 outlay will be charged off as an expense by the firm this year (year 0). The returns estimated from the program in the form of greater productivity and a reduction in employee turnover are as follows (on an after-tax basis):Years 1–10: $7,500 per yearYears 11–20: $22,500 per yearThe company has estimated its cost of capital to be 15 percent. Assume that the entire $75,000 is paid at time zero (the beginning of the project). The marginal tax rate for the firm is 40 percent.Based on the NPV criterion, should the firm undertake the training program?The Fleming Manufacturing Company is considering a new investment. Financial projections for the investment are tabulated below. The corporate tax rate is 21 percent. Assume all sales revenue is received in cash, all operating costs and income taxes are paid in cash, and all cash flows occur at the end of the year. All net working capital is recovered at the end of the project. Year 0 Year 1 Year 2 Year 3 Year 4 Investment $ 35,000 Sales revenue $ 18,000 $ 18,500 $ 19,000 $ 16,000 Operating costs 3,800 3,900 4,000 3,200 Depreciation 8,750 8,750 8,750 8,750 Net working capital spending 410 460 510 410 ? a. Compute the incremental net income of the investment for each year. (Do not round intermediate calculations.) b. Compute the incremental cash flows of the investment for each year. (Do not round intermediate calculations. A negative answer should be indicated by a minus sign.) c. Suppose the appropriate discount rate is 11 percent. What is the NPV of the project?The Fleming Manufacturing Company is considering a new investment. Financial projections for the investment are tabulated below. The corporate tax rate is 25 percent. Assume all sales revenue is received in cash, all operating costs and income taxes are paid in cash, and all cash flows occur at the end of the year. All net working capital is recovered at the end of the project. Investment Sales revenue Operating costs Depreciation Net working capital spending Net income Cash flow $ Year 1 NPV 3,975 $ $ Year 0 Year O 34,000 $ 400 a. Compute the incremental net income of the investment for each year. (Do not round intermediate calculations.) Year 1 $ 17,500 3,700 8,500 450 Year 2 4,275 $ Year 1 5,300 $18,000 Year 2 Year 3 b. Compute the incremental cash flows of the investment for each year. (Do not round intermediate calculations. A negative answer should be indicated by a minus sign.) Year 3 4,575 $ Year 2 3,800 3,900 8,500 8,500 500 400 $18,500 $15,500 3,100 8,500 ? Year 4 Year 4…
- A company is planning to invest $75,000 (before taxes) in a personnel training program. The $75,000 outlay will be charged off as an expense by the firm this year (year 0). The returns estimated from the program in the form of greater productivity and a reduction in employee turnover are as follows (on an after-tax basis): Years 1–5: $7,500 per year Years 6–10: $22,500 per year The company has estimated its cost of capital to be 15 percent. Assume that the entire $75,000 is paid at time zero (the beginning of the project). The marginal tax rate for the firm is 40 percent. Complete the following table to compute the net present value (NPV) of the program. (Hint: When calculating cash flow for Year 0, consider the tax effects of charging off the initial outlay as an expense.) Year Cash Flow PV Interest Factor at 15% Present Value (PV) ($) ($) 0 1.00000 1 0.86957 2 0.75614 3 0.65752 4 0.57175 5…The Best Manufacturing Company is considering a new investment. Financial projections for the investment are tabulated here. The corporate tax rate is 22 percent. Assume all sales revenue is received in cash, all operating costs and income taxes are paid in cash, and all cash flows occur at the end of the year. All net working capital is recovered at the end of the project. Year 0 Year 1 Year 2 Year 3 Year 4 Investment $ 26,500 Sales revenue $ 13,600 $ 15,200 $ 16,600 $ 13,100 Operating costs 3,000 3,150 4,400 3,000 Depreciation 6,625 6,625 6,625 6,625 Net working capital spending 310 210 245 160 ? a. Compute the incremental net income of the investment for each year. (Do not round intermediate calculations.) b. Compute the incremental cash flows of the investment for each year. (Do not round intermediate calculations. A negative…The Fleming Manufacturing Company is considering a new investment. Financial projections for the investment are tabulated below. The corporate tax rate is 23 percent. Assume all sales revenue is received in cash, all operating costs and income taxes are paid in cash, and all cash flows occur at the end of the year. All net working capital is recovered at the end of the project. Year 0 Year 1 Year 2 Year 3 Year 4 Investment $ 27,000 Sales revenue $ 14,000 $ 14,500 $ 15,000 $ 12,000 Operating costs 3,000 3,100 3,200 2,400 Depreciation 6,750 6,750 6,750 6,750 Net working capital spending 330 380 430 330 ? a. Compute the incremental net income of the investment for each year. (Do not round intermediate calculations.)
- The Best Manufacturing Company is considering a new investment. Financial projections for the investment are tabulated here. The corporate tax rate is 34 percent. Assume all sales revenue is received in cash, all operating costs and income taxes are paid in cash, and all cash flows occur at the end of the year. All net working capital is recovered at the end of the project. Investment Sales revenue Operating costs Depreciation Net working capital spending Net income Year O $27,000 Year 1 $ Cash flow 330 Year 1 $14,000 $14,500 3,000 6,750 380 280 a. Compute the incremental net income of the investment for each year. (Do not round intermediate calculations.) Year 2 Year 2 Year O $-27330 Year 3 3,100 3,200 6,750 6,750 430 330 3069 $15,000 $12,000 2,400 6,750 ? Year 1 $ Year 4 Year 3 b. Compute the incremental cash flows of the investment for each year. (Do not round intermediate calculations. A negative answer should be indicated by a minus sign.) 3333 Year 4 $ Year 2 $ c. Suppose the…The Fleming Manufacturing Company is considering a new investment. Financial projections for the investment are tabulated below. The corporate tax rate is 22 percent. Assume all sales revenue is received in cash, all operating costs and income taxes are paid in cash, and all cash flows occur at the end of the year. All net working capital is recovered at the end of the project. Year 0 Year 1 Year 2 Year 3 Year 4 Investment $ 41,000 Sales revenue $ 21,000 $ 21,500 $ 22,000 $ 19,000 Operating costs 4,400 4,500 4,600 3,800 Depreciation 10,250 10,250 10,250 10,250 Net working capital spending 470 520 570 470 ? a. Compute the incremental net income of the investment for each year. Year 1, Year 2, Year 3, Year 4 b. Compute the incremental cash flows of the investments for each year. Year 1, Year 2, Year 3, Year 4 c. Suppose the appropriate discount rate…You are asked to evaluate the following project for a corporation profitable ongoing operations. The required investment on January 1 of this year is $29,000. The firm will depreciate the investment at a CCA rate of 20 percent. The firm is in the 40 percent tax bracket. The price of the product on January 1 year 1 is $104 per unit. That price will stay constant in real terms. Labour costs is $14.00 per hour on January 1 year 1. Labour costs will increase by 1 percent per year in real terms after year 1. Energy costs will be $7.20 per physical unit on January 1 year 1; energy cost will increase at 2.5 percent per year in real terms after year 1. The inflation rate is 4.1 percent. The company sells all of its production in the year produced; revenue is received and costs are paid at year-end: Physical production, in units Labour input, in hours Energy input, physical units Year 1 150 1,080 180 Year 2 300 1,080 180 Year 3 350 1,080 180 Year 4 150 1,080 180 The risk-free nominal discount…
- The Fleming Manufacturing Company is considering a new investment. Financial projections for the investment are tabulated below. The corporate tax rate is 23 percent. Assume all sales revenue is received in cash, all operating costs and income taxes are paid in cash, and all cash flows occur at the end of the year. All net working capital is recovered at the end of the project. Investment Sales revenue Operating costs Depreciation Net working capital spending Net income $ Year 1 Year O 42,000 480 Year 1 Year 2 Year 3 Year 2 22,500, $21,500 $ 22,000$ 4,500 4,600 4,700 10,500 10,500 10,500 530 580 480 a. Compute the incremental net income of the investment for each year. (Do not round intermediate calculations.) Year 3 Year 4 Year 4 $19,500 3,900 10,500 ?The Fancy Manufacturing Company is considering a new investment. Financial projections for the investment are tabulated here. The corporate tax rate is 21 percent. Assume all sales revenue is received in cash, all operating costs and income taxes are paid in cash, and all cash flows occur at the end of the year. All net working capital is recovered at the end of the project. Year 1 Year 2 a. Investment Sales revenue Operating costs Depreciation Net working capital spending 305 Year 0 $ 26,400 C. $ 13,500 2,950 6,600 205 Year 3 $15,100 3,125 4,300 6,600 6,600 235 $16,500 155 Year 4 $13,000 2,900 6,600 ? Compute the incremental net income of the investment for each year. (Do not round intermediate calculations and round your answers to the nearest whole number, e.g., 32.) Compute the incremental cash flows of the investment for each year. (A negative amount should be b. indicated by a minus sign. Do not round intermediate calculations and round your answers to the nearest whole number,…A company has purchased a new piece of machinery for $100,000. The estimate it will result in annual cost savings of $15,000 per year, this will increase every year by $500. The machinery will last for 8 years, at which time it will be sold for $7,000. What is the company's BEFORE tax rate of return? The company estimates a federal tax rate of 21%. What is their AFTER tax rate of return?