Briarcrest Condiments is a spice-making firm. Recently, it developed a new proce
ID: 2702440 • Letter: B
Question
Briarcrest Condiments is a spice-making firm. Recently, it developed a new process for producing spices. The process requires new machinery that would cost $2,419,028. have a life of five years, and would produce the cash flows shown in the following table.
Year Cash Flow
1 $484,872
2 -299,244
3 885,913
4 1,067,687
5 559,139
What is the NPV if the discount rate is 15.41 percent? (Enter negative amounts using negative sign e.g. -45.25. Round answer to 2 decimal places, e.g. 15.25.)
NPV is $ ______
Archer Daniels Midland Company is considering buying a new farm that it plans to operate for 10 years. The farm will require an initial investment of $11.90 million. This investment will consist of $2.10 million for land and $9.80 million for trucks and other equipment. The land, all trucks, and all other equipment is expected to be sold at the end of 10 years at a price of $5.20 million, $2.24 million above book value. The farm is expected to produce revenue of $2.10 million each year, and annual cash flow from operations equals $1.94 million. The marginal tax rate is 35 percent, and the appropriate discount rate is 10 percent. Calculate the NPV of this investment. (Round intermediate calculations and final answer to 2 decimal places, e.g. 15.25.)
NPV $ _____
The project should be accepted or rejected
Bell Mountain Vineyards is considering updating its current manual accounting system with a high-end electronic system. While the new accounting system would save the company money, the cost of the system continues to decline. The Bell Mountain%u2019s opportunity cost of capital is 10.9 percent, and the costs and values of investments made at different times in the future are as follows:
Year Cost Value of Future Savings
(at time of purchase)
0 $5,000 $7,000
1 4,700 7,000
2 4,400 7,000
3 4,100 7,000
4 3,800 7,000
5 3,500 7,000
Calculate the NPV of each choice. (Round answers to the nearest whole dollar, e.g. 5,275.)
The NPV of each choice is:
NPV0 = $
NPV1 = $
NPV2 = $
NPV3 = $
NPV4 = $
NPV5 = $
Suggest when should Bell Mountain buy the new accounting system?
Bell Mountain should purchase the system in year1, year 2, year 3, year 4, year 5
Chip%u2019s Home Brew Whiskey management forecasts that if the firm sells each bottle of Snake-Bite for $20, then the demand for the product will be 15,000 bottles per year, whereas sales will be 88 percent as high if the price is raised 9 percent. Chip%u2019s variable cost per bottle is $10, and the total fixed cash cost for the year is $100,000. Depreciation and amortization charges are $20,000, and the firm has a 30 percent marginal tax rate. Management anticipates an increased working capital need of $3,000 for the year. What will be the effect of the price increase on the firm%u2019s FCF for the year? (Round answers to nearest whole dollar, e.g. 5,275.)
At $20 per bottle the Chip%u2019s FCF is $ __________ and at the new price Chip%u2019s FCF is $ _______
Capital Co. has a capital structure, based on current market values, that consists of 37 percent debt, 17 percent preferred stock, and 46 percent common stock. If the returns required by investors are 9 percent, 13 percent, and 18 percent for the debt, preferred stock, and common stock, respectively, what is Capital%u2019s after-tax WACC? Assume that the firm%u2019s marginal tax rate is 40 percent. (Round intermediate calculations to 4 decimal places, e.g. 1.2514 and final answer to 2 decimal places, e.g. 15.25%.)
After tax WACC= %
Explanation / Answer
NPV= -772273.8802
npv=152.2166
it should be accepted.
NPV0= 2000
NPV1=2073.91
NPV2=2113.8
NPV3=2125.7
NPV4=2115.2
NPV4=2086
he should purchase the system in year 3.
fcf at 20=38900
new fcf=166832
4.WACC=12.488%
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