A project currently generates sales of $11.6 million, variable costs equal to 50% of sales, and fixed costs of $3.8 million. The firm's tax rate is 30%. a. What are the effects on the after-tax profits and cash flow, if sales increase from $11.6 million to $13.8 million. (1Input all amounts as positive values. Do not round intermediate calculations. Enter your answers in millions rounded to 3 decimal places.) After-tax profit (Click to select) by $ million. Cash flow (Click to select) v by $ million. b. What are the effects on the after-tax profits and cash flow, if variable costs increase to 55% of sales. (Input all amounts as positive values. Do not round intermediate calculations. Enter your answers in millions rounded to 3 decimal places.) After-tax profit (Click to select) by $ Cash flow (Click to select) million. v by $ million.

A project currently generates sales of $11.6 million, variable costs equal to 50% of sales, and fixed costs of $3.8 million. The firm's tax rate is 30%. a. What are the effects on the after-tax profits and cash flow, if sales increase from $11.6 million to $13.8 million. (1Input all amounts as positive values. Do not round intermediate calculations. Enter your answers in millions rounded to 3 decimal places.) After-tax profit (Click to select) by $ million. Cash flow (Click to select) v by $ million. b. What are the effects on the after-tax profits and cash flow, if variable costs increase to 55% of sales. (Input all amounts as positive values. Do not round intermediate calculations. Enter your answers in millions rounded to 3 decimal places.) After-tax profit (Click to select) by $ Cash flow (Click to select) million. v by $ million.

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter11: Cash Flow Estimation And Risk Analysis

Section: Chapter Questions

Problem 8P

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Your division is considering two investment projects, each of which requires an up-front expenditure of 25 million. You estimate that the cost of capital is 10% and that the investments will produce the following after-tax cash flows (in millions of dollars): a. What is the regular payback period for each of the projects? b. What is the discounted payback period for each of the projects? c. If the two projects are independent and the cost of capital is 10%, which project or projects should the firm undertake? d. If the two projects are mutually exclusive and the cost of capital is 5%, which project should the firm undertake? e. If the two projects are mutually exclusive and the cost of capital is 15%, which project should the firm undertake? f. What is the crossover rate? g. If the cost of capital is 10%, what is the modified IRR (MIRR) of each project?
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