Ch 9-1 The expected cash flows for a project are as follows. The required return is 12 percent.
Calculate the Internal Rate of Return and state whether the project should be accepted or rejected.
year |
cash flow |
0 |
(32,000) |
1 |
14,000 |
2 |
15,750 |
3 |
11,250 |
The expected cash flows for a project are shown below.
Ch 9-2 a Calculate the NPV with a 14% required rate of return and state whether the project should be accepted or rejected.
Ch 9-2 b Calculate the NPV with a 20% required rate of return and state whether the project should be accepted or rejected.
year |
cash flow |
0 |
(38,500) |
1 |
16,750 |
2 |
20,250 |
3 |
17,500 |
Ch 10-1 Calculating Projected Net Income [LO1] A proposed new investment has projected sales of $740,000. Variable costs are 46 percent of sales, and fixed costs are $225,000; depreciation is $78,000.
Ch 10-1 Prepare a proforma income statement assuming a tax rate of 32 percent. What is the projected net income?
Project Evaluation [LO1] A company is looking at a new production system with an installed cost of $725,000. This cost will be depreciated in equal installments over the project’s five-year life, at the end of which the system will retain a salvage value of $125,000. The system will save the firm $275,000 per year in pretax operating costs, and the system requires an initial investment in net working capital of $38,000.
Ch 10-2 If the tax rate is 36 percent and the discount rate is 12 percent, what is the NPV of this project?
Calculating Break-Even [LO3] In each of the following cases:
Calculate the accounting break-even and the cash break-even points. Ignore any tax effects in calculating the cash break-even.
Ch 11-1a Ch 11-2 a Ch 11-3 a
unit price |
variable cost per unit |
fixed cost |
annual depreciation |
2,200 |
1,850 |
6,000,000 |
2,200,000 |
50 |
42 |
150,000 |
145,000 |
275 |
210 |
16,250 |
18,750 |
Using Break-Even Analysis [LO3] Consider a project with the following data: accounting break-even quantity = 15,400 units; cash break-even quantity = 12,200 units; project life = 6 years; fixed costs = $220,000; variable costs = $34 per unit; required return = 10 percent. Ignore the effect of taxes.
Ch 11-2 Find the financial break-even quantity.
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