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- 1.) A project is estimated to cost P100,000, lasts 8 years and have a P10,000 salvage value. The annual gross income is expected to average P24,000, and annual expenses, excluding depreciation will total P6,000. If capital is earning 10% before income tax, determine if this is a desirable investment using A.) Rate of Return Method and B.) Annual Cost or Worth Method. II. Gradients (Shows solutions manually): 2.) The year-end operating and maintenance costs of a certain machine are estimated to be P12,000 the first year and to increase by P2,500 each year during its 4-year life. If capital is worth 12%, determine the equivalent uniform year-end costs. 3.) Annual maintenance costs for an equipment are P1,500 this year and are estimated to increase 10% each year every year. What is the present worth of maintenance cost for six years if i = 12%3. A project requires an initial investment of $1,000,000 and generates annual income of $300,000 for the next 4 years with a salvage value of $200,000. At MARR of 10% determine if this is a good investment. Use MACRS with the depreciation life of 3 years. Effective tax rate is 40%. Use PW.Required Investment = $80,000. Project life = 2 years. Salvage value =$30,000. CCA rate = 20% declining balance and 50% rule applies. Annual revenues = $90,000 and annual O&M costs = $20,000. Marginal tax rate = 30%. Assume all the values provided here are in constant dollars, similar to how it's done on slide 38 of Ch.14. Find the net present worth of the project. The MARR' = 10% and inflation rate =6%. The NPW is within $50 of which of the following: 40,042 40,142 40,242 40,342 40,442 None of the above
- A PROJECT IS ESTIMATED TO COST P 100,000.00, LASTS 8 YEARS, AND HAVE A P 10,000.00 SALVAGE VALUE. THEANNUAL GROSS INCOME IS EXPECTED TO AVERAGE P 24,000.00 AND ANNUAL EXPENSES, EXCLUDINGDEPRECIATION, WILL TOTAL P 6,000.00. IF CAPITAL IS EARNING 10% BEFORE INCOME TAXES, DETERMINE IFTHIS IS A DESIRABLE INVESTMENT USING:A.) RATE-OF-RETURN METHODB.) ANNUAL COST METHODC.) PRESENT-WORTH COST METHODSuppose you are considering an investment project that requires $800.000, has a six-year life, and has a salvage value of $100,000. Sales volume is projected 10 be 65,000 units per year. Price per un it is $63, variable cos! per unit is $42, and fixed costs are $532,000 per year. The depreciation method is a five-year MACRS. 1l1e tax rate is 35% and you ex pect a 20% relurn on this investment. a-Determine the break-even sales volume. b-Calculate the cash flows of the base case over six years and its NPW. c-lf the sales price per unit increases to $400, what is the required break-even volume? d-Suppose the projections given for price, sales volume, variable costs, and fixed costs are all accurate to within ± 15%. What would be the NPW figures of the best-case and worst-case scenarios?A company is considering a 3-year project with a projected net income of sh. 4M, 6M,5M in year 1, year 2 and year 3 respectively. The initial investment is sh. 40M and the salvage value is sh.2M.The company applies the straight line method for depreciating its assets, what is the Accounting Rate of Return? Assume a tax rate of 30% Select one: A. 26.3% B. 23.8% C.25% D. None of the above
- An asset is planned to be purchased with an initial value of $400,000 and an estimatedsalvage value of $50,000 after 5 years of use. It will be depreciated using the straight-line method.With this asset $500,000 of annual income will be generated and there will beannual costs of $100,000The trem (minimum acceptable rate of return), m = 10% per yearThe annual tax rate is 40%Calculate the present value of this investment and make a recommendation. Please show your workd. Project D costs $5,000 and will generate sales of $4,000 each year for 5 years. The cash expenditures will be $1,500 per year. The firm uses straight-line depreciation with an estimated salvage value of $500 and has a tax rate of 25%. (1) What is the accounting (book) rate of return based on the original investment? (Round your answer to 2 decimal places.) (2) What is the book rate of return based on the average book value? (Round your answer to 2 decimal places.) Use the built-in NPV function in Excel to calculate the amounts for projects A through D. (Round your answers to the nearest whole dollar amount.) e1. What is the NPV of project A? Assume that the firm requires a minimum after-tax return of 8% on investment. e2. What is the NPV of project B? Assume that the firm requires a minimum after-tax return of 8% on investment. e3. What is the NPV of project C? Assume that the firm requires a minimum after-tax return of 8% on investment. e4. What is the NPV of project D? Assume…3. An investment of $500,000 generates an annual income of$150,000 over the next4 years with a salvage value of$200,000. At MARR-10% is this a good investment (by computing P.W. factor)?, The effective tax rate is 40% and MACRS depreciation with depreciation life of 3 years is employed. The present worth of this investment is:
- 1. For ABC project, book value of the equipment is estimated to be 500,000 at the end of the project's life, and the market value is expected to be 400,000. Clean up costs are 50,000 and change in working capital is 100,000. Calculate net salvage value assuming a 30% tax rate. Paragraph В I !!Q2. Suppose you are considering the following project with most-likely values: • Project life = 6 years Required investment= $1,000,000 • Salvage value = 80,000 • Depreciation method = 5-year MACRS • Sales volume = 65,000 units annually • Price per unit = $60 • Variable cost per unit - $40 • Fixed annual cost = $532,000 Tax rate = 35% • MARR = 20% (a) Compute the NPW for the most likely case showing all computations. (b) If you were told that the unit price, anmual sales volume, unit variable costs, and fixed costs are all accurate to within +15%, what would be the NPW in the best-case and in the worst case?A Mountain Frost is considering a new project with an initial cost of $270,000. The equipment will be depreciated on a straight-line basis to a zero book value over the four-year life of the project. The projected net income for each year is $21,300, $22,200, $24,600, and $18.200, respectively, What is the average accounting return? Multiple Choice O O O C 14.65% 15.00% 11.99% 1712%