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


Problem #1: TexMex Food Troop is because a new salsa whose cause are shown beneath.  The equipment to be used would be depreciated by the straight-line manner balance its 3-year vivacity and would own a pin salvage appraise, and no substitute in net liberal started excellent would be required.  Revenues and other liberal absorbs are expected to be continuous balance the device's 3-year vivacity.  However, this device would cope delay other TexMex products and would attenuate their pre-tax annual principal progresss.  What is the device's NPV?  (Hint:  Cash progresss are continuous in Years 1-3.)

 

WACC                                                                                                                          10.0%

Pre-tax principal progress abatement for other products (cannibalization)                                              -$5,000

Investment absorb (depreciable cause)                                                                           $80,000

Straight-line backbiting reprove                                                                                  33.333%

Annual sales revenues                                                                                                $67,500

Annual liberal absorbs (excl. backbiting)                                                             -$25,000

Tax reprove                                                                                                                         35.0%

 

Problem #2: Sub-Prime Loan Troop is purposeing of commencement a new service, and the key cause are shown beneath.  The troop owns the structure that would be used, and it could retail it for $100,000 subjoined taxes if it decides not to notorious the new service.  The equipment for the device would be depreciated by the straight-line manner balance the device's 3-year vivacity, subjoined which it would be estimate pin and thus it would own a pin salvage appraise.  No substitute in net liberal started excellent would be required, and revenues and other liberal absorbs would be continuous balance the device's 3-year vivacity.  What is the device's NPV?  (Hint: Principal progresss are continuous in Years 1-3.)

 

WACC                                                                                                                          10.0%

Opportunity absorb                                                                                                         $100,000

Net equipment absorb (depreciable cause)                                                                        $65,000

Straight-line backbiting reprove for equipment                                                             33.333%

Annual sales revenues                                                                                              $123,000

Annual liberal absorbs (excl. backbiting)                                                                   $25,000

Tax rate                                                                                                                             35%

 

 

Problem #3: Desai Industries is analyzing an average-risk device, and the subjoined cause own been familiar.  Unit sales earn be continuous, but the sales worth should acception delay inflation.  Fixed absorbs earn too be continuous, but inimmutable absorbs should run delay inflation.  The device should conclusive for 3 years, it earn be depreciated on a straight-line cause, and there earn be no salvage appraise.  No substitute in net liberal started excellent would be required.  This is upright one of abundant devices for the attached, so any losses on this device can be used to offset gains on other attached devices.  What is the device's expected NPV?

 

WACC                                                                                                                          10.0%

Net boarding absorb (depreciable cause)                                                                   $200,000

Units sold                                                                                                                     50,000

Average worth per individual, Year 1                                                                                     $25.00

Fixed oper. absorbs excl. backbiting (constant)                                                        $150,000

Variable oper. absorb/unit, Year 1                                                                                   $20.20

Annual backbiting reprove                                                                                          33.333%

Expected inflation reprove per year                                                                                   5.00%

Tax reprove                                                                                                                         40.0%

 

Problem #4: Poulsen Industries is analyzing an average-risk device, and the subjoined cause own been familiar.  Unit sales earn be continuous, but the sales worth should acception delay inflation.  Fixed absorbs earn too be continuous, but inimmutable absorbs should run delay inflation.  The device should conclusive for 3 years, it earn be depreciated on a straight-line cause, and there earn be no salvage appraise.  No substitute in net liberal started excellent would be required.  This is upright one of abundant devices for the attached, so any losses on this device can be used to offset gains on other attached devices. The marketing superintendent does not purpose it is needful to adupright for inflation gone twain the sales worth and the inimmutable absorbs earn run at the selfselfsame reprove, but the CFO purposes an inflation appointment is required.  What is the dissimilarity in the expected NPV if the inflation appointment is made versus if it is not made?

 

WACC                                                                                                                          10.0%

Net boarding absorb (depreciable cause)                                                                   $200,000

Units sold                                                                                                                     50,000

Average worth per individual, Year 1                                                                                     $25.00

Fixed oper. absorbs excl. backbiting (constant)                                                        $150,000

Variable oper. absorb/unit, Year 1                                                                                   $20.20

Annual backbiting reprove                                                                                          33.333%

Expected inflation                                                                                                        4.00%

Tax reprove                                                                                                                         40.0%

 

 

Problem #5: Florida Car Wash is because a new device whose cause are shown beneath.  The equipment to be used has a 3-year tax vivacity, would be depreciated on a straight-line cause balance the device's 3-year vivacity, and would own a pin salvage appraise subjoined Year 3.  No substitute in net liberal started excellent would be required.  Revenues and other liberal absorbs earn be continuous balance the device's vivacity, and this is upright one of the attached's abundant devices, so any losses on it can be used to offset receipts in other individuals.  If the compute of cars washed wasted-away by 40% from the expected equalize, by how abundant would the device's NPV substitute?  (Hint: Note that principal progresss are continuous at the Year 1 equalize, whatever that equalize is.)

 

WACC                                                                                                                          10.0%

Net boarding absorb (depreciable cause)                                                                     $60,000

Number of cars washed                                                                                                 2,800

Average worth per car                                                                                                   $25.00

Fixed oper. absorbs (excl. backbiting)                                                                        $10,000

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

Annual backbiting                                                                                                   $20,000

Tax reprove           35.0%