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Unformatted text preview: Newly purchased industrial eqpt costs $847,000 and 7 year property under MACRS. After 5 yrs, eqpt will be sold for $80,000. Annual depreciation allowances and endof theyear book values over the 5 yrs that this eqpt will be used? Aftertax salvage value T=34%? Yr Begin bv MACRS Depr End b v 1 $847,000 0.1429 $121,036.3 $725,963.7 2 725,963.7 0.2449 207,430.3 518,533.4 3 518,533.4 0.1749 148,140.3 370,393.1 4 370,393.1 0.1249 105,790.3 264,602.8 5 264,602.8 0.0893 75,637.1 188,965.7 ATSV = (1T) x BTSV +T x EndBV =117,048.30Considering a new 3yr expansion prjt, initial fixed asset invest of $2.7 mill. The fixed asset depr. strtline to 0 over its 3 yr tax life. The prjt is estimated to generate $2.4 mill in annual sales, costs of $.96 mill. No changes in NWC needs associated with the project. OCF for project w T=35%? NPV w disc rate 12%? OCF = (1T) x (Sales  Costs) + T x Depr = .65 x 1,440,000 + .35 x 900,000= 1,251,000 0 1 2 3 OCF 1251000 1251000 1251000 NCS 2700000 0 0 ChNWC  CFFA 2700000 1251000 1251000 1251000 NPV = $304,690.92A 5yr prjct initial fixed asset investment of $210k, an initial NWC invest of $20k, and an annual OCF of $32k. The fixed asset is fully depr over the life of the project and has no salvage value. NWC recovered at end. Req ret is 15%, what is equivalent annual cost (EAC)? 0 1 2 3 4 5 OCF 32k 32k 32k 32k 32k NCS 210k ChNWC 20k 20k ==================================== CFFA 230k 32k 32k 32k 32k 12k NPV = 327,325.43 n=5, r=.15, pv=327,325.43, FV=0 pmt=?=97646.27= EAC150,000 cartons of screws per yr over the next 5 yrs. It will cost $780k to install the eqpt to start projt; depr cost strtline to 0 over the project's life. In 5 yrs, this eqpt salvaged for $50k. Fixed production costs will be $240k/ yr, VCosts should be $8.50/carton. Initial investment in net working capital of $75k (recovered at the end). T=35% and require 16% ret on your invest. What bid price? ATSV = .65 x 50000 = 32,500 0 1 2 3 4 5 OCF ? ? ? ? ? NCS 780000 32,500 ChNWC 75000 75,000 ==================================== CFFA 855k ? ? ? ? ?+107.5k OCF B/E n=5 PV=855k I=16 FV=107.5k pmt=? =ocf=245,493.51 OCF = (Sales  Costs) x (1  T) + Depr x T Depr= 780,000 / 5 = 156,000 Costs=FC+VCxQ=240k+8.5x150k=1,515k Sales=(OCFDeprxT+Costsx(1T) )/(1T)= 1,808,682 Or, 1,808,682 / 150,000 = 12.06 per box.Projt following estimated data: price= $70/unit; VC=$37/unit; fixed costs =$6k; req ret= 15%; initial invest= $12k; life= 4 yr. Use strtline depr over 4yr, and the projt no salvage value. T=34%. What is the accounting B/E quantity? The cash B/E quantity (ignoring the depr T shield)? The financial B/E quantity?...
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This note was uploaded on 10/05/2008 for the course FNCE 3010 taught by Professor Donchez,ro during the Fall '07 term at Colorado.
 Fall '07
 DONCHEZ,RO
 Corporate Finance

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