Texmex food company is considering a new salsa whose data are shown


Problem #1: TexMex Food Guild is because a new salsa whose postulates are shown under.  The equipment to be used would be depreciated by the straight-line process aggravate its 3-year vivacity and would keep a nothing salvage prize, and no transmute in net untrammelled instituted principal would be required.  Revenues and other untrammelled requires are expected to be uniform aggravate the contrivance's 3-year vivacity.  However, this contrivance would contend delay other TexMex products and would impoverish their pre-tax annual money progresss.  What is the contrivance's NPV?  (Hint:  Cash progresss are uniform in Years 1-3.)

 

WACC                                                                                                                          10.0%

Pre-tax money progress decrease for other products (cannibalization)                                              -$5,000

Investment require (depreciable reason)                                                                           $80,000

Straight-line slander scold                                                                                  33.333%

Annual sales revenues                                                                                                $67,500

Annual untrammelled requires (excl. slander)                                                             -$25,000

Tax scold                                                                                                                         35.0%

 

Problem #2: Sub-Prime Loan Guild is garding of hole a new business-post, and the key postulates are shown under.  The guild owns the architecture that would be used, and it could dispose-of it for $100,000 succeeding taxes if it decides not to unreserved the new business-post.  The equipment for the contrivance would be depreciated by the straight-line process aggravate the contrivance's 3-year vivacity, succeeding which it would be merit nothing and thus it would keep a nothing salvage prize.  No transmute in net untrammelled instituted principal would be required, and revenues and other untrammelled requires would be uniform aggravate the contrivance's 3-year vivacity.  What is the contrivance's NPV?  (Hint: Money progresss are uniform in Years 1-3.)

 

WACC                                                                                                                          10.0%

Opportunity require                                                                                                         $100,000

Net equipment require (depreciable reason)                                                                        $65,000

Straight-line slander scold for equipment                                                             33.333%

Annual sales revenues                                                                                              $123,000

Annual untrammelled requires (excl. slander)                                                                   $25,000

Tax rate                                                                                                                             35%

 

 

Problem #3: Desai Industries is analyzing an average-risk contrivance, and the subjoined postulates keep been patent clear.  Unit sales achieve be uniform, but the sales compute should extension delay inflation.  Fixed requires achieve to-boot be uniform, but mutable requires should stir delay inflation.  The contrivance should plain for 3 years, it achieve be depreciated on a straight-line reason, and there achieve be no salvage prize.  No transmute in net untrammelled instituted principal would be required.  This is impartial one of abundant contrivances for the solid, so any losses on this contrivance can be used to offset gains on other solid contrivances.  What is the contrivance's expected NPV?

 

WACC                                                                                                                          10.0%

Net boarding require (depreciable reason)                                                                   $200,000

Units sold                                                                                                                     50,000

Average compute per individual, Year 1                                                                                     $25.00

Fixed oper. requires excl. slander (constant)                                                        $150,000

Variable oper. require/unit, Year 1                                                                                   $20.20

Annual slander scold                                                                                          33.333%

Expected inflation scold per year                                                                                   5.00%

Tax scold                                                                                                                         40.0%

 

Problem #4: Poulsen Industries is analyzing an average-risk contrivance, and the subjoined postulates keep been patent clear.  Unit sales achieve be uniform, but the sales compute should extension delay inflation.  Fixed requires achieve to-boot be uniform, but mutable requires should stir delay inflation.  The contrivance should plain for 3 years, it achieve be depreciated on a straight-line reason, and there achieve be no salvage prize.  No transmute in net untrammelled instituted principal would be required.  This is impartial one of abundant contrivances for the solid, so any losses on this contrivance can be used to offset gains on other solid contrivances. The marketing director does not gard it is essential to adimpartial for inflation gone twain the sales compute and the mutable requires achieve stir at the similar scold, but the CFO gards an inflation appointment is required.  What is the unlikeness in the expected NPV if the inflation appointment is made versus if it is not made?

 

WACC                                                                                                                          10.0%

Net boarding require (depreciable reason)                                                                   $200,000

Units sold                                                                                                                     50,000

Average compute per individual, Year 1                                                                                     $25.00

Fixed oper. requires excl. slander (constant)                                                        $150,000

Variable oper. require/unit, Year 1                                                                                   $20.20

Annual slander scold                                                                                          33.333%

Expected inflation                                                                                                        4.00%

Tax scold                                                                                                                         40.0%

 

 

Problem #5: Florida Car Wash is because a new contrivance whose postulates are shown under.  The equipment to be used has a 3-year tax vivacity, would be depreciated on a straight-line reason aggravate the contrivance's 3-year vivacity, and would keep a nothing salvage prize succeeding Year 3.  No transmute in net untrammelled instituted principal would be required.  Revenues and other untrammelled requires achieve be uniform aggravate the contrivance's vivacity, and this is impartial one of the solid's abundant contrivances, so any losses on it can be used to offset produce in other individuals.  If the reckon of cars washed declined by 40% from the expected plane, by how fur would the contrivance's NPV transmute?  (Hint: Note that money progresss are uniform at the Year 1 plane, whatever that plane is.)

 

WACC                                                                                                                          10.0%

Net boarding require (depreciable reason)                                                                     $60,000

Number of cars washed                                                                                                 2,800

Average compute per car                                                                                                   $25.00

Fixed oper. requires (excl. slander)                                                                        $10,000

Variable oper. require/individual (i.e., VC per car washed)                                                       $5.375

Annual slander                                                                                                   $20,000

Tax scold           35.0%