Fall_2008_Prelim2_Solutions - 1c 2b 3b 4a 5a 6b 7a 8d 9e 10...

Info iconThis preview shows pages 1–5. Sign up to view the full content.

View Full Document Right Arrow Icon
1 c 2 b 3 b 4 a 5 a 6 b 7 a 8 d 9 e 10 b
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Problem 1 Input area: Installed cost $370,000 Salvage value $80,000 Initial NWC $50,000 Tax rate 35% Required return 12% MACRS 33.33% 44.44% 14.82% 7.41% Output area: Aftertax salvage value $52,000.00 Year 1 depreciation $123,321.00 Year 2 depreciation $164,428.00 Year 3 depreciation $54,834.00 Year 4 depreciation $27,417.00 Year 1 depreciation CF $43,162.35 Year 2 depreciation CF $57,549.80 Year 3 depreciation CF $19,191.90 Year 4 depreciation CF $9,595.95 Initial cash outlay $(420,000.00) NPV net of OCF $(257,947.48) Pretax cost savings $110,087.91
Background image of page 2
Problem 2a Input area: Quantity 800,000 Installation costs $1,475,000 Pretax salvage value $250,000 Fixed costs $265,000 Variable production cost per carton $1.25 Net working capital $38,000 Tax rate 35% Required return 15% *Depreciation staight-line over life 5 Output area: Aftertax salvage value $162,500.00 Depreciation tax shield $103,250.00 Initial cash outlay $(1,513,000.00) NPV w/o OCF $(1,413,316.06) Necessary OCF $421,614.16 OCF net of dep. tax shield $318,364.16 Bid price $2.19
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Problem 2bc Input area: Quantity 800,000 Installation costs $1,475,000 Pretax salvage value $250,000 Fixed costs $265,000 Variable production cost per carton $1.25 Net working capital $38,000 Tax rate 35% Required return 15% *Depreciation straight-line over life 5 Price per carton $4.00 Output area: Aftertax salvage value $162,500 a. Year 0 1 Sales $3,200,000 Variable costs 1,000,000 Fixed costs 265,000 Depreciation 295,000 EBIT 1,640,000 Taxes 574,000 Net income 1,066,000 Depreciation 295,000 Operating cash flow $1,361,000 Net cash flows Operating cash flow $- $1,361,000 Change in NWC (38,000) - Capital spending (1,475,000) - Total cash flow $(1,513,000) $1,361,000
Background image of page 4
Image of page 5
This is the end of the preview. Sign up to access the rest of the document.

This homework help was uploaded on 02/20/2009 for the course H ADM 225 taught by Professor Jwellman during the Fall '07 term at Cornell University (Engineering School).

Page1 / 16

Fall_2008_Prelim2_Solutions - 1c 2b 3b 4a 5a 6b 7a 8d 9e 10...

This preview shows document pages 1 - 5. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online