FINANCIAL MANAGEMENT(LL)-TEXT
16th Edition
ISBN: 9781337902618
Author: Brigham
Publisher: CENGAGE L
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Chapter 11, Problem 6MC
Summary Introduction
Case summary:
Company S desires to add a new line to its product mix. For the purpose of this the analysis of capital budgeting are conducted by person X an MBA graduate. In order to set up this a machinery should be installed. For this installation company incurred certain additional expenses such as installation expenses and shipping charge etc. The machinery has a 4 years’ life with a salvage value of $25000.
The new line leads to increase sales. It results to an increase in company’s net working capital by 12% value of sales. Company’s tax rate is 25% and risk adjusted cost of capital and weighted average cost of capital for an average project is 10%.
To compute: The salvage cash flow after tax.
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Chapter 11 Solutions
FINANCIAL MANAGEMENT(LL)-TEXT
Ch. 11 - Prob. 2QCh. 11 - Why is it true, in general, that a failure to...Ch. 11 - Prob. 4QCh. 11 - Explain how net operating working capital is...Ch. 11 - How do simulation analysis and scenario analysis...Ch. 11 - Why are interest charges not deducted when a...Ch. 11 - Most firms generate cash inflows every day, not...Ch. 11 - What are some differences in the analysis for a...Ch. 11 - Distinguish among beta (or market) risk,...Ch. 11 - Prob. 11Q
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- Is accounting for the tax effects on project cash flows worth the effort? Please discuss and justify your answer.arrow_forwardCalculate the after-tax cash outflows and the net present value of the cash outflows under eachalternative andarrow_forwardWhich of the following payback methods considers the salvage value in its basic computations? a. Traditional payback b. Bailout payback c. Present value payback d. Discounted paybackarrow_forward
- Distinguish between annual income in the presence of depreciation and annual operating cash flow?arrow_forwardExplain how did it get the value of depreciation, income taxation, NOPAT, and after-tax cash flow in the table.arrow_forwardTo get a project's after-tax cash flow, you must subtract depreciation as though it is an expense from the taxable income and then add it back again as though it is a positive cash flow to get the final net cash flow.a. Trueb. Falsearrow_forward
- Present value of decommissioning and restoration costs are capitalized as PPE and with a corresponding credit to what account?arrow_forwardChoose the correct.Determination of net present value involves: A)forecasting future profits and cash flows. B)discounting future cash flows back to their present value. C)analysis on an after-tax basis. D)All of the abovearrow_forwardNeed answers ASAP... It approximates the present value of what will be received through ownership of the property, including the time value of money. a. Fair value b. Salvage value c. Market value d. Book valuearrow_forward
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