Kites Galore is considering making and selling custom kites in two sizes. The small kites would be priced at $14 and the large kites would be $21. The variable cost per unit is $8 and $12, respectively. Tom, the owner, feels that he could sell 3,800 of the small kites and 2,400 of the large kites each year. The fixed costs would only be $4,000 a year and the tax rate is 35 percent. What is the annual operating cash flow if the annual depreciation expense is $2,700? $27,845 $26,260 $27,205 $29,245 $29,130
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- You have a factory that produces light bulbs. Your old machine is costing a lot of money lately inrepairs and you are considering replacing it. You have two offers: You sell each light bulb for $0.40, the discount rate is 12%, and the corporate tax rate 40%.(a) Which machine would you prefer to buy if your annual production is 1,000,000 light bulbs!(b) At what level of production will you change your answer?Kinky Copies may buy a high-volume copier. The machine costs $60,000 and this cost can be fully depreciated immediately. Kinky anticipates that the machine actually can be sold in 5 years for $22,000. The machine will save $23,000 a year in (after-tax) labor costs but will require an increase in working capital, mainly paper supplies, of $5,000. The firm's tax rate is 21%, and the discount rate is 11%. (Assume the net working capital will be recovered at the end of Year 5.) What is the NPV of this project? Note: Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 2 decimal places. NPVA chemical company is considering buying a magic fan for its plant. Th e magic fan is expected to work forever and help cool the machines in the plant and, hence, reduce their maintenance costs by $6,000 per year. Th e cost of the fan is $50,000. Th e appropriate discount rate is 10 percent, and the marginal tax rate is 35 percent. Should the company buy the magic fan
- Beryl’s Iced Tea currently rents a bottling machine for $50,000 per year, including all maintenance expenses. It is considering purchasing a machine instead, and is comparing two options: Purchase the machine it is currently renting for $150,000. This machine will require $20,000 per year in ongoing maintenance expenses. Purchase a new, more advanced machine for $250,000. This machine will require $15,000 per year in ongoing maintenance expenses and will lower bottling costs by $10,000 per year. Also, $35,000 will be spent upfront in training the new operators of the machine. Suppose the appropriate discount rate is 8% per year and the machine is purchased today. Maintenance and bottling costs are paid at the end of each year, as is the rental of the machine. Assume also that the machines will be depreciated via the straight-line method over seven years and that they have a 10-year life with a negligible salvage value. The marginal corporate tax rate is 35%. Should Beryl’s Iced…Kinky Copies may buy a high-volume copier. The machine costs $100,000 and this cost can be fully depreciated immediately. Kinky anticipates that the machine actually can be sold in 5 years for $28,000. The machine will save $18,000 a year in (after-tax) labor costs but will require an increase in working capital, mainly paper supplies, of $9,000. The firm's tax rate is 21%, and the discount rate is 6%. (Assume the net working capital will be recovered at the end of Year 5.) What is the NPV of this project? Note: Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 2 decimal places. Answer is complete but not entirely correct. $ 8,304.15 NPVA salad oil bottling plant can either buy caps for the glass bottles at 5 cents each or install $500,000 worth of plastic molding equipment and manufacture the caps at the plant. The manufacturing engineer estimates the material, labor, and other costs would be 3 cents per cap. (a) If 11 million caps per year are needed and the molding equipment is installed, what is the payback period? (b) The plastic molding equipment would be depreciated by straightline depreciation using a 6-year useful life and no salvage value. Assuming a combined 26% income tax rate, what is the after-tax payback period, and what is the after-tax rate of return?
- Chauhan Restaurant is considering the purchase of a soufflé maker that costs $10,100. The soufflé maker has an economic life of 6 years and will be fully depreciated by the straight-line method. The machine will produce 1,700 soufflés per year, with each costing $2.80 to make and priced at $4.75. The discount rate is 12 percent and the tax rate is 25 percent. What is the NPV of the project? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)Linksys is considering the development of a wireless home networking appliance, called HomeNet, that will provide both the hardware and the software necessary to run an entire home from any Internet connection. HomeNet's lab will be housed in warehouse space that the company could have otherwise rented out for $190,000 per year during years 1 through 4. The tax rate for Linksys is 20%. How does this opportunity cost affect HomeNet's incremental earnings? HomeNet will experience in incremental earnings of $ per year for the 4 years. (Select from the drop-down menu and round to the nearest dollar.)Chauhan Restaurant is considering the purchase of a soufflé maker that costs $11,100. The soufflé maker has an economic life of 8 years and will be fully depreciated by the straight-line method. The machine will produce 1,600 soufflés per year, with each costing $2.80 to make and priced at $4.75. The discount rate is 12 percent and the tax rate is 25 percent. What is the NPV of the project? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) NPV
- The ABC Corporation is considering introducing a new product, which will require buying new equipment for a monthly payment of $5,000. Each unit produced can be sold for $20.00. ABC incurs a variable cost of $10.00 per unit. Suppose that ABC would like to realize a monthly profit of $50,000. How many units must they sell each month to realize this profit?Chauhan Restaurant is considering the purchase of a soufflé maker that costs $10,000. The soufflé maker has an economic life of 5 years and will be fully depreciated by the straight-line method. The machine will produce 1,600 soufflés per year, with each costing $2.50 to make and priced at $4.75. The discount rate is 10 percent and the tax rate is 21 percent. What is the NPV of the project? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Tip: Calculate OCF first, then calculate the NPV of the project.Kinky Copies may buy a high-volume copier. The machine costs $130,000 and this cost can be fully depreciated immediately. Kinky anticipates that the machine actually can be sold in 5 years for $30,000. The machine will save $22,000 a year in labor costs as an after-tax reduction, but will require an increase in working capital, mainly paper supplies, of $11,000. The firm's marginal tax rate is 21%, and the discount rate is 6%. (Assume the net working capital will be recovered at the end of Year 5.) What is the NPV of this project? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 2 decimal places)