QUESTION 27 Doris M. Bradey has invested $1,200,000 in a small (280 seat) theatre. All of this monoyshould be considered her nvestment. She would lke to see a 10% after-tax rutum on her investment in the coming year. Doris faces a personal tax rate of 38% She expects the theatre soats to be sold at a 75% capacity on average, and that in this year the theotre will be open on 130 nights. There are many costs involvda in running a theatre. Estimates indicate that variable costs will use 70% of the revenue earned by the theatre Fxed costs would be Salaries $420,000 Insurance 40,000 License 15,000 Utties 110,000 Also, depreciation on the theatre building itself would be 10% of the building's $800,000 current book value Part of Doris' investment (included in the $1,200,000 mentioned above) in the theatre came through a bank loan of $250,000, on which she will be paying 5% interest this year REQUIRED A Please calculate the total amount of revenue that this theatre will need to eam this yoar, in order to meet all costs and allow for Doris' expected after tax return.

QUESTION 27 Doris M. Bradey has invested $1,200,000 in a small (280 seat) theatre. All of this monoyshould be considered her nvestment. She would lke to see a 10% after-tax rutum on her investment in the coming year. Doris faces a personal tax rate of 38% She expects the theatre soats to be sold at a 75% capacity on average, and that in this year the theotre will be open on 130 nights. There are many costs involvda in running a theatre. Estimates indicate that variable costs will use 70% of the revenue earned by the theatre Fxed costs would be Salaries $420,000 Insurance 40,000 License 15,000 Utties 110,000 Also, depreciation on the theatre building itself would be 10% of the building's $800,000 current book value Part of Doris' investment (included in the $1,200,000 mentioned above) in the theatre came through a bank loan of $250,000, on which she will be paying 5% interest this year REQUIRED A Please calculate the total amount of revenue that this theatre will need to eam this yoar, in order to meet all costs and allow for Doris' expected after tax return.

Fundamentals of Financial Management (MindTap Course List)

14th Edition

ISBN:9781285867977

Author:Eugene F. Brigham, Joel F. Houston

Publisher:Eugene F. Brigham, Joel F. Houston

Chapter12: Cash Flow Estimation And Risk Analysis

Section: Chapter Questions

Problem 16P: REPLACEMENT CHAIN The Fernandez Company has an opportunity to invest in one of two mutually...

See similar textbooks

Similar questions

123 Each of the following scenarios is independent. Assume that all cash flows are after-tax cash flows. Campbell Manufacturing is considering the purchase of a new welding system. The cash benefits will be $480,000 per year. The system costs $1,550,000 and will last 10 years. Evee Cardenas is interested in investing in a women's specialty shop. The cost of the investment is $180,000. She estimates that the return from owning her own shop will be $55,000 per year. She estimates that the shop will have a useful life of 6 years. Barker Company calculated the NPV of a project and found it to be $63,900. The project's life was estimated to be 8 years. The required rate of return used for the NPV calculation was 10%. The project was expected to produce annual after-tax cash flows of $135,000. Required: 1. Compute the NPV for Campbell Manufacturing, assuming a discount rate of 12%. If required, round all present value calculations to the nearest dollar. Use the minus sign to indicate a…
answer in 20 minutes Shelton Tax Services is considering investing in new software for their corporate tax business. The investment will require an outlay of $350,000 initially, and is expected to generate the following after-tax cash flows: Year 1, $60,000; Year 2, $80,000; Year 3, $105,000; Year 4, $120,000; Year 5, $145,000. Shelton uses a discount rate of 10%. What is the net present value of the proposed investment? Should this investment be accepted or rejected? Must show your computation steps. Use the appropriate tables in Appendix A to obtain the relevant present value factor and round up your final answer to the nearest dollar.
12. I need help with finance home work question asap please An investment that would require an initial cash outflow of $360,000 at the beginning is expected to produce cash inflows of $70,000 at the end of each of the investment's 7 years. Assume the required return is 13% and you wanted to determine the investment's discounted paypack period. What amount would you subtract from the investment's initial cash outflow of $360,000 when determining how much of the initial cost would be left to recover on a discounted basis at the beginning of the second year?
Elon Musk Capital Project – Assessment #11 Suppose Elon Musk has an existing business making electric bicycles. Sales are so strong that he is considering selling his existing factory and replacing it with a new factory. A: The current factory can be sold for $100mm; it has a tax value of $50mm.The current factory produces annual after tax cash flow of $50mm. Elon believe that after eight years from now, the existing factory would have a resale value of $20mm with a tax value then of $8mm. B: A new bicycle factory can be built for $250mm and equipment will cost $300mm plus installation costs of $50mm. Assume the plant and equipment can be built and operational on day one. C: Expect working capital needs as follows (starting on day one): Increase of $35mm in Accounts Receivable and $50mm of Inventory; expect increased $25mm of Accounts Payable. D: He initially projects after-tax cash flows of $200mm per year for eight years occurring on the last day of each year, starting at the…
Elon Musk Capital Project – Assessment #11 Suppose Elon Musk has an existing business making electric bicycles. Sales are so strong that he is considering selling his existing factory and replacing it with a new factory. A: The current factory can be sold for $100mm; it has a tax value of $50mm.The current factory produces annual after tax cash flow of $50mm. Elon believe that after eight years from now, the existing factory would have a resale value of $20mm with a tax value then of $8mm. B: A new bicycle factory can be built for $250mm and equipment will cost $300mm plus installation costs of $50mm. Assume the plant and equipment can be built and operational on day one. C: Expect working capital needs as follows (starting on day one): Increase of $35mm in Accounts Receivable and $50mm of Inventory; expect increased $25mm of Accounts Payable. D: He initially projects after-tax cash flows of $200mm per year for eight years occurring on the last day of each year, starting at the…
use excel 4. A firm is considering a new project that will generate cash revenue of $1,300,000 and cash expenses of $700,000 per year for five years. The equipment necessary for the project will cost $300,000 and will be depreciated straight line over four years. What is the NPV if the firm's marginal tax rate is 35% and discount rate is 10%?
Week 4 Giant Equipment Ltd. is considering two projects to invest next year. Both projects have the same start-up costs. Project A will produce annual cash flows of $42,000 at the beginning of each year for eight years. Project B will produce cash flows of $48,000 at the end of each year for seven years. The company requires a 12% return. Which project should the company select if the interest rate is 14% at the cash flows in Project B is also at the beginning of each year?
Question 19 After spending $10,200 on client-development, you have just been offered a big production contract by a new client. The contract will add $204,000 to your revenues for each of the next five years and it will cost you $99,000 per year to make the additional product. You will have to use some existing equipment and buy new equipment as well. The existing equipment is fully depreciated, but could be sold for $54,000 now. If you use it in the project, it will be worthless at the end of the project. You will buy new equipment valued at $25,000 and use the 5-year MACRS schedule to depreciate it. It will be worthless at the end of the project. Your current production manager earns $80,000 per year. Since she is busy with ongoing projects, you are planning to hire an assistant at $45,000 per year to help with the expansion. You will have to immediately increase your inventory from $20,000 to $30,000. It will return to $20,000 at the end of the project. Your company's tax…
12) Talbot Industries is considering launching a new product. The new manufacturing equipment will cost $18 million, and production and sales will require an initial $1 million investment in net operating working capital. The company's tax rate is 25%. Enter your answers as a positive values. Enter your answers in millions. For example, an answer of $10,550,000 should be entered as 10.55. Round your answers to two decimal places. a) What is the initial investment outlay? $ ______million b)The company spent and expensed $150,000 on research related to the new project last year. What is the initial investment outlay? $ ______ million c) Rather than build a new manufacturing facility, the company plans to install the equipment in a building it owns but is not now using. The building could be sold for $1.7 million after taxes and real estate commissions. What is the initial investment outlay? $ ______ million
You arc considering a luxury apartment building project that requires an investment of $12,500,000. The building has 50 units. You expect that the maintenance cost for the apartment building will be $250,000 in the first year, and to rise to $300,000 in the second year, and to continue to increase by $50,000 in subsequent years. The cost to hire a manager for the building is estimated to be $80,000 per year. After five years of operation, the apartment building can be sold for $14,000,000. What annual rent per apartment unit will provide a return on investment of 15%? Assume that the building will remain fully occupied during the five years.
11. I need help with finance home work question A company is considering a 7-year project. At the beginning of the project, a cash outflow in the amount of $340,000 would be required. The company expects the project would generate cash inflows in the amount of $70,000 at the end of each of the project's 7 years. Assume the company requires a return of 8%. What NPV does the company expect for this project?
12–22. Jim Ryan, an owner of a Burger King restaurant, assumes that his restaurant will need a new roof in 7 years. He estimates the roof will cost him $9,000 at that time. What amount should Jim invest today at 6% compounded quarterly to be able to pay for the roof? PROVIDE THE FOLLOWING FOR EACH PROBLEM N= I= PV= PMT= FV= C/Y= P/Y =