Esfandairi Enterprises is considering a new 3-year expansion project that requires an initial fixed asset investment of $2.28 million. The fixed asset will be depreciated straight-line to zero over its 3-year tax life, after which time it will be worthless. The project is estimated to generate $1,750,000 in annual sales, with costs of $660,000. The tax rate is 23 percent and the required return is 13 percent. What is the project's NPV? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to 2 decimal places, e.g., 1,234,567.89.)
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- The Rodriguez Company is considering an average-risk investment in a mineral water spring project that has an initial after-tax cost of 170,000. The project will produce 1,000 cases of mineral water per year indefinitely, starting at Year 1. The Year-1 sales price will be 138 per case, and the Year-1 cost per case will be 105. The firm is taxed at a rate of 25%. Both prices and costs are expected to rise after Year 1 at a rate of 6% per year due to inflation. The firm uses only equity, and it has a cost of capital of 15%. Assume that cash flows consist only of after-tax profits because the spring has an indefinite life and will not be depreciated. a. What is the present value of future cash flows? (Hint: The project is a growing perpetuity, so you must use the constant growth formula to find its NPV.) What is the NPV? b. Suppose that the company had forgotten to include future inflation. What would they have incorrectly calculated as the projects NPV?Shao Airlines is considering the purchase of two alternative planes. Plane A has an expected life of 5 years, will cost $100 million, and will produce net cash flows of $30 million per year. Plane B has a life of 10 years, will cost $132 million, and will produce net cash flows of $25 million per year. Shao plans to serve the route for only 10 years. Inflation in operating costs, airplane costs, and fares are expected to be zero, and the company’s cost of capital is 12%. By how much would the value of the company increase if it accepted the better project (plane)? What is the equivalent annual annuity for each plane?The Perez Company has the opportunity to invest in one of two mutually exclusive machines that will produce a product it will need for the foreseeable future. Machine A costs $10 million but realizes after-tax inflows of $4 million per year for 4 years. After 4 years, the machine must be replaced. Machine B costs $15 million and realizes after-tax inflows of $3.5 million per year for 8 years, after which it must be replaced. Assume that machine prices are not expected to rise because inflation will be offset by cheaper components used in the machines. The cost of capital is 10%. By how much would the value of the company increase if it accepted the better machine? What is the equivalent annual annuity for each machine?
- Markoff Products is considering two competing projects, but only one will be selected. Project A requires an initial investment of $42,000 and is expected to generate future cash flows of $6,000 for each of the next 50 years. Project B requires an initial investment of $210,000 and will generate $30,000 for each of the next 10 years. If Markoff requires a payback of 8 years or less, which project should it select based on payback periods?Staten Corporation is considering two mutually exclusive projects. Both require an initial outlay of 150,000 and will operate for five years. The cash flows associated with these projects are as follows: Statens required rate of return is 10%. Using the net present value method and the present value table provided in Appendix A, which of the following actions would you recommend to Staten? a. Accept Project X and reject Project Y. b. Accept Project Y and reject Project X. c. Accept Projects X and Y. d. Reject Projects X and Y.Esfandiri Enterprises is considering a new three year expansion project that requires an initial fixed asset investment of $2.18 million. The fixed asset will be depreciated straight-line to zero over its three year tax life, after which time it will be worthless. The Project is estimated to generate $1.645 million in annual sales with costs of $610,000. If the tax rate is 27.00% what is the OCF per year (OCF will be the same for the three years) for this project? Group of answer choices $650,058.06 $715,063.86 $786,570.25 $865,227.27 $951,750.00
- Esfandairi Enterprises is considering a new 3-year expansion project that requires an initial fixed asset investment of $2.31 million. The fixed asset will be depreciated straight- line to zero over its 3-year tax life, after which time it will be worthless. The project is estimated to generate $1,785,000 in annual sales, with costs of $695,000. The tax rate is 25 percent and the required return is 12 percent. What is the project's NPV? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to 2 decimal places, e.g., 1,234,567.89.) NPVEsfandairi Enterprises is considering a new 3-year expansion project that requires an initial fixed asset investment of $2.3 million. The fixed asset will be depreciated straight-line to zero over its 3-year tax life, after which time it will be worthless. The project is estimated to generate $1,720,000 in annual sales, with costs of $630,000. The tax rate is 22 percent and the required return is 11 percent. What is the project’s NPV?Quad Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2.9 million. The fixed asset will be depreciated straight-line to zero over its three year tax life, after which time it will be worthless. The project is estimated to generate $2,190,000 in annual sales, with costs of $815,000. The tax rate is 35%. What is the NPV of the project if the required rate of return is 12% O $47,523 O $59,255 O $68.991 O $52.648
- Esfandairi Enterprises is considering a new 3 - year expansion project that requires an initial fixed asset investment of $2.34 million. The fixed asset will be depreciated straight line to zero over its 3-year tax life, after which time it will be worthless. The project is estimated to generate $1, 740, 000 in annual sales, with costs of $650,000. The tax rate is 21 percent and the required return is 11 percent. What is the project's NPV?ces Esfandairi Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2.37 million. The fixed asset will be depreciated straight- line to zero over its three-year tax life, after which time it will be worthless. The project is estimated to generate $1,765,000 in annual sales, with costs of $675,000. The tax rate is 21 percent and the required return on the project is 12 percent. What is the project's NPV? (Do not round intermediate calculations. Enter your answer in dollars, not millions of dollars, and round your answer to 2 decimal places, e.g., 1,234,567.89.) NPV $ 175,547.89Esfandairi Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2.18 million. The fixed asset will be depreciated straight-line to zero over its three-year tax life, after which time it will be worthless. The project is estimated to generate $1.645 million in annual sales, with costs of $610,000. Assume the tax rate is 21 percent and the required return on the project is 12 percent. What is the project's NPV? Note: A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to 2 decimal places, e.g., 1,234,567.89.) Net present value