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Unformatted text preview: Chapter 7 Problems 140 Input boxes in tan Output boxes in yellow Given data in blue Calculations in red Answers in green NOTE: Some functions used in these spreadsheets may require that the "Analysis ToolPak" or "Solver Addin" be installed in Excel. To install these, click on "ToolsAddIns" and select "Analysis ToolPak and "Solver AddIn." k" Chapter 7 Question 1 Input area: Initial investment $10,000 *Depreciation straightline over life 5 Units sold 2,000 Cost per unit $2 Price per unit $5 Tax rate 34% Required return 17% Output area: Sales $10,000 Costs 4,000 Depreciation 2,000 EBT $4,000 Tax 1,360 Net income $2,640 OCF $4,640 NPV $4,844.97 Chapter 7 Question 2 Input area: Year 0 Year 1 Year 2 Year 3 Year 4 Investment $10,000    Sales revenue $7,000 $7,000 $7,000 $7,000 Operating costs 2,000 2,000 2,000 2,000 Depreciation 2,500 2,500 2,500 2,500 Net working capital 200 250 300 200 ? Tax rate 34% Required return 12% Output area: Sales $7,000 $7,000 $7,000 $7,000 Costs 2,000 2,000 2,000 2,000 Depreciation 2,500 2,500 2,500 2,500 EBT $2,500 $2,500 $2,500 $2,500 Tax 850 850 850 850 Net income $1,650 $1,650 $1,650 $1,650 OCF $4,150 $4,150 $4,150 $4,150 Capital spending $(10,000)    NWC (200) (250) (300) (200) 950 Incremental cash flow $(10,200) $3,900 $3,850 $3,950 $5,100 NPV $2,404.01 Chapter 7 Question 3 Input area: Asset investment $2,700,000 Estimated annual sales $2,400,000 Costs $960,000 Tax rate 35% *Depreciation straightline to zero over tax life 3 Required return 15% Output area: OCF $1,251,000.00 NPV $156,314.62 Chapter 7 Question 4 Input area: Asset investment $2,700,000 Estimated annual sales $2,400,000 Costs $960,000 Tax rate 35% Required return 15% *Depreciation straightline to zero over tax life 3 OCF $1,251,000 Initial investment in NWC $300,000 Fixed asset value at end $210,000 Output area: Year Cash flow $(3,000,000) 1 $1,251,000 2 $1,251,000 3 $1,687,500 NPV $143,320.46 Chapter 7 Question 5 Input area: Asset investment $2,700,000 Estimated annual sales $2,400,000 Costs $960,000 Tax rate 35% Required return 15% Initial investment in NWC $300,000 Fixed asset value at end $210,000 *3 yr MACRS 0.3330 0.4440 0.1480 Output area: Year Depreciation Cash flow $(3,000,000.00) 1 $899,100.00 $1,250,685.00 2 $1,198,800.00 $1,355,580.00 3 $399,600.00 $1,583,235.00 Book value $202,500 Aftertax salvage value $207,375 NPV $153,568.12 Chapter 7 Question 6 Input area: Initial investment $925,000 Pretax salvage value $90,000 Cost savings per year $360,000 Working capital reduction $(125,000) Tax rate 35% *Depreciation straightline over life 5 Output area: Annual depreciation charge $185,000 Aftertax salvage value $58,500 OCF $298,750 Year Cash flow $(800,000) 1 $298,750 2 $298,750 3 $298,750 4 $298,750 5 $232,250 IRR 23.85% Chapter 7 Question 7 Input area: Installation cost $390,000 Operating cost per year $120,000 Initial NWC $28,000 Pretax salvage value $60,000 Tax rate 34% Discount rate 10% *Depreciation straightline over life 5...
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This note was uploaded on 02/14/2011 for the course FINANCE 610 taught by Professor Siad during the Fall '09 term at UMBC.
 Fall '09
 Siad
 Corporate Finance

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