A project is expected to increase a firm’s sales revenue by $12,000 annually, de
ID: 2719253 • Letter: A
Question
A project is expected to increase a firm’s sales revenue by $12,000 annually, decrease it cash expenses by $18,000 annually, and increase its depreciation by $10,000 annually. Given this information, what is the project’s expected annual net cash flow? Use a 40% effective tax rate.
$400
$12,000
$22,000
$18,000
A capital budgeting project is expected to have the following cash flows:
Year Cash Flows
0 -$1,000,000
1 $400,000
2 $400,000
3 $200,000
4 $400,000
What is the project’s internal rate of return?
16.00%
8.99%
21.86%
15.54%
A capital budgeting project is expected to have the following cash flows:
Year Cash Flows
0 -$850,000
1 $300,000
2 $400,000
3 $500,000
What is the project’s net present value at an 18% required rate of return?
-$4,173.50
$10,800.96
-$18,725.33
$350,000.00
Luther’s Famous Barbeque has estimated the following cost of debt (before-tax) and cost of equity.
Proportion of Debt Before-tax Cost of Debt Cost of Equity
30% 7.0% 11.1%
40% 7.3% 11.9%
50% 8.4% 13.7%
What is the cost of capital at Luther’s optimal capital structure given the above information and a 40% effective tax rate?
8.71%
8.89%
9.03%
9.37%
Explanation / Answer
Solution:
Therefore, the answer to the abive question is $ 22,000
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