Brew Whiskey - 571-1.xls - Sheet1 Chip’s Home Brew...

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Unformatted text preview: Sheet1 Chip’s Home Brew Whiskey management forecasts that if the firm sells each bottle of Snake-Bite for $20, th be 15,000 bottles per year, whereas sales will be 83 percent as high if the price is raised 13 percent. Chip’s v the total fixed cash cost for the year is $100,000. Depreciation and amortization charges are $20,000, and th tax rate. Management anticipates an increased working capital need of $3,000 for the year. What will be the firm’s FCF for the year? At $20 per bottle the Chip’s FCF is $38000 and at the new price Chip’s FCF is $30608. Net Income at $20 = (15000*(20-10) - 100000 -20000)*70% = 21000 FCF = 21000+20000-3000 = 38000 Net Income at New Price = (15000*83%*(20*1.13-10) – 100000 -20000)*70% = 25809 FCF = 25809+20000-3000 = 42809 Briarcrest Condiments is a spice-making firm. Recently, it developed a new process for producing spices. The p would cost $2,233,600. have a life of five years, and would produce the cash flows shown in the following table Year 1 2 3 4 5 Cash Flow $491,176 -$248,970 $729,192 $1,042,933 $645,511 What is the NPV if the discount rate is 14.04 percent? (Enter negative amounts using negative sign e.g. -45.25 e.g. 15.25.) NPV -$551,364.06 Problem 11.20 Archer Daniels Midland Company is considering buying a new farm that it plans to operate for 10 years. The fa $11.90 million. This investment will consist of $2.60 million for land and $9.30 million for trucks and other equipm other equipment is expected to be sold at the end of 10 years at a price of $5.10 million, $2.37 million above bo produce revenue of $2.06 million each year, and annual cash flow from operations equals $1.90 million. The ma appropriate discount rate is 9 percent. Calculate the NPV of this investment. (Round intermediate calculations a e.g. 15.25.) All figures in Million Year 0 1 2 Cash Flow Initial Investment Annual cash Flow -$11.90 $1.90 $1.90 Page 1 Net Cash Flow -$11.90000 $1.90000 $1.90000 Sheet1 3 4 5 6 7 8 9 10 $4.27050 $1.90 $1.90 $1.90 $1.90 $1.90 $1.90 $1.90 $1.90 $1.90000 $1.90000 $1.90000 $1.90000 $1.90000 $1.90000 $1.90000 $6.17050 NPV $2.09745498 After Tax Salvage Value = 5.10 - 2.37*35% 4.2705 If the NPV figure is not to be presented in million then it would be = The project should be accepted since it has positive NPV Capital Co. has a capital structure, based on current market values, that consists of 25 percent debt, 18 percen common stock. If the returns required by investors are 11 percent, 12 percent, and 15 percent for the debt, pref respectively, what is Capital’s after-tax WACC? Assume that the firm’s marginal tax rate is 40 percent. (Round i places, e.g. 1.2514 and final answer to 2 decimal places, e.g. 15.25%.) WACC = .25*11%*(1-.40) + .18*12% + .57*15% = 12.36% <<If you have any further questions on the above assignment, feel to ask and I would be happy to help>> <<You can request me in future by writing “FOR LINDA” at start of your post>> <<Please do rate my solution as Excellent/Good by clicking Smiley face so that I get paid for helping yo Page 2 Sheet1 m sells each bottle of Snake-Bite for $20, then the demand for the product will igh if the price is raised 13 percent. Chip’s variable cost per bottle is $10, and nd amortization charges are $20,000, and the firm has a 30 percent marginal eed of $3,000 for the year. What will be the effect of the price increase on the hip’s FCF is $30608. 0000)*70% = 25809 ed a new process for producing spices. The process requires new machinery that e the cash flows shown in the following table. ive amounts using negative sign e.g. -45.25. Round answer to 2 decimal places, m that it plans to operate for 10 years. The farm will require an initial investment of and $9.30 million for trucks and other equipment. The land, all trucks, and all price of $5.10 million, $2.37 million above book value. The farm is expected to from operations equals $1.90 million. The marginal tax rate is 35 percent, and the vestment. (Round intermediate calculations and final answer to 2 decimal places, Page 3 Sheet1 (In Million) $2,097,454.98 s, that consists of 25 percent debt, 18 percent preferred stock, and 57 percent 12 percent, and 15 percent for the debt, preferred stock, and common stock, m’s marginal tax rate is 40 percent. (Round intermediate calculations to 4 decimal 5%.) to ask and I would be happy to help>> miley face so that I get paid for helping you>> Page 4 ...
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