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# 1. Raphael Restaurant is considering the purchase of a \$12,000 souffl maker. The souffl maker has an economic life of five years and will be fully

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1. Raphael Restaurant is considering the purchase of a \$12,000 soufflé maker. The soufflé maker has an economic life of five years and will be fully depreciated by the straight-line method. The machine will produce 1,900 soufflés per year, with each costing \$2.20 to make and priced at \$5. Assume that the discount rate is 14 percent and the tax rate is 34 percent. Required: (a) What is the operating cash flow of the project? (Do not include the dollar sign (\$). Round your answer to 2 decimal places. (e.g., 32.16)) OCF \$ (b) What is the NPV of the project? (Do not include the dollar sign (\$). Round your answer to 2 decimal places. (e.g., 32.16)) NPV \$ 2. Down Under Boomerang, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment of \$2.4 million. The fixed asset will be depreciated straight-line to zero over its three-year tax life, after which it will be worthless. The project is estimated to generate \$2,050,000 in annual sales, with costs of \$950,000. The tax rate is 35 percent and the required return is 12 percent. The project requires an initial investment in net working capital of \$285,000 and the fixed asset will have a market value of \$225,000 at the end of the project. Required: (a) What are the net cash flows of the project for the following years? (Do not include the dollar signs (\$). Negative amounts should be indicated by a minus sign.) Net cash flows Year 0 \$ Year 1 \$ Year 2 \$ Year 3 \$ (b) What is the NPV of the project? (Do not include the dollar sign (\$). Round your answer to 2 decimal places. (e.g., 32.16)) NPV \$ 3. Down Under Boomerang, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment of \$2.4 million. The fixed asset falls into the three-year MACRS class ( MACRS Table ). The project is estimated to generate \$2,050,000 in annual sales, with costs of \$950,000. The tax rate is 35 percent and the required return is 12 percent. The project requires an initial investment in net working capital of \$285,000 and the fixed asset will have a market value of \$225,000 at the end of the project. Required: (a) What is the net cash flow of the project for the following years? (Do not include the dollar signs (\$). Negative amounts should be indicated by a minus sign.) Net cash flow Year 0 \$ Year 1 \$ Year 2 \$ Year 3 \$
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