give answer without fail +No. Question1.23A project will incur $700 in shutdown costs theyear after the completion of the project. The taxrate is 35%. What is the tax shield resulting fromthese tax-deductible shutdown costs (where anegative number means a cash outflow and apositive number means an incremental cashinflow)?A project will incur $700 in shutdown costs the yearafter the completion of the project. The tax rate is 35%.What is the tax shield resulting from these tax-deductible shutdown costs (where a negative numbermeans a cash outflow and a positive number means anincremental cash inflow)?An investment of $83 generates after-tax cash flows of$50.00 in Year 1, $72.00 in Year 2, and $125.00 in Year 3.The required rate of return is 20 percent. Find the netpresent value.

Answer : 1 and 2 (Both Question are same) Step 1: Tax Shield:The deductions or expenses for a firm…

Answered: + No. Question 1. 2 3 A project will…

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter11: Cash Flow Estimation And Risk Analysis

Section: Chapter Questions

Problem 2STP

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A project’s after-tax operating cash flow is $200,000 per year, with operating costs of $100,000 and depreciation of $20,000 per year. The firm’s marginal tax rate is 40%. What are the annual sales revenues from this project (rounded to the nearest dollar)? Select one: a. $200,000 b. $377,143 c. $394,286 d. $420,000 e. $640,000
What is the IRR for the following project if its initial after-tax cost is R5 000 000 and it is expected to provide after-tax operating cash inflows of R1 800 000 in year 1, R1 900 000 in year 2, R1 700 000 in year 3 and R1 300 000 in year 4? What is the correct answer? A. 15.57% B. 0.00% C. 13.57% D. None of the above
15 A project will increase sales by $92,800 and cash expenses by $53,200. The project will cost $89,000 and be depreciated using straight-line depreciation to a zero book value over the 4-year life of the project. The tax rate is 35 percent. What is the operating cash flow of the project using the tax shield approach?
Part B: Solve the following excersises: 1. A company is considering two mutually exclusive projects X and Y. Each require an initial investment of OMR 100,000.The after tax cash inflows associated with each project are as follows: Year Project X Cash flows Project Y Cash flows (Initial Investment) 120,000 120,000 25,000 20,000 2 ? ? 3 ? ? ? ? 5 ? ? (a) Complete the table where Payback period for Project X is 3.5 and for project Y is 4. (b) Which project is better?
An investment has an initial cost of $3.2 million. This investment will be depreciated by $900,000 a year over the 3-year life of the project. Should this project be accepted based on the average accounting rate of return if the required rate is 10.5 percent? Why or why not? Net Income $211.700 186.400 Year 165,500 O Yes; because the AAR is 10.5 percent O Yes; because the AAR is less than 10.5 percent O Yes; because the AAR is greater than 10.5 percent O No; because the AAR is greater than 10.5 percent O No; because the AAR is less than 10.5 percent
A project has the following cash in and out flows in its first year: Income generated: R100 000 Cost of sales R30 000 Depreciation R10 000 What would the tax payable for the first year of the project be if the tax rate is 27%?
Consider the following two mutually exclusive projects: Year Cash Flow(A) -$ 63,000 39,000 33,000 22,500 14,600 Cash Flow(B) -$ 63,000 25,700 29,700 35,000 24,700 4 1-What is the IRR for each project? Project A Project B % % 2.IF you apply the IRR decision rule, which project should ti 3.Assume the required return is 14 percent. What is the NP Project A Project B 0123
A company expects to need to increase their net working capital by $200,000 at the beginning of a potential project's life. By how much would this event affect the project's terminal cash flow at the end of its expected life if the company's tax rate is 25%? -$200,000 $0 +$150,000 +$200,000
What is the IRR for the following project if its initial after-tax cost is R5 000 000 and it is expected to provide after-tax operating cash inflows of R1 800 000 in year 1, R1 900 000 in year 2, R1 700 000 in year 3 and R1 300 000 in year 4? A. 15.57% B. 0.00% C. 13.57% D. None of the above
A cost-cutting project will decrease costs by $68,300 a year. The annual depreciation will be $17,400 and the tax rate is 21 percent. What is the operating cash flow for this project? Multiple Choice о о о о $17,815 $38,305 $44,395 $57,611 $29,995
What is the internal rate of return of a capital investment project that has the followingafter-tax cash flows for a company that requires a 15% rate of return on the project?Time Cash Flow0 -$4,0001 5002 2,000 3 5,000
Mario Kat, Inc plans a new project. Calculate its IRR. Assume that its initial after tax cost is $5,000,000 and it is expected to provide after-tax operating cash flows of ($1,800,000) in year 1, $2,900,000 in year 2, $2,700,000 in year 3 and $2,300,000 in year 4?

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