Gaewelyn is considering opening a new business for a long-term care facility. The initial investment for...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Gaewelyn is considering opening a new business for a long-term care facility. The initial investment for the business is $650,000, which includes constructing the housing unit and purchasing other assets. For tax purposes, the projected salvage value of all the assets is $80,000. The government requires depreciating the assets using the straight-line method over the business's life of 15 years. Gaewelyn is trying to estimate the net cashflows after tax for this business. She has already figured out that the business will generate an annual after-tax cash inflow of $85,000 from the operation. She now needs your help to estimate the net cash inflow that she will receive from selling the facility's assets at the end of 15 years. Goewelyn's required return is 8%. Required: (1) Gaewelyn estimates that, if the economic is booming at the end of the 15 years, she can sell the assets for $118,000. Assuming the tax rate of 30%, what is the net after-tax cashflow Gaewelyn will receive from selling her assets at the end of 15 years? (Please round your answer to the nearest dollar) $[ (2) If Gaewelyn is able to sell her assets for $118,000, as mentioned in (1) above, what is the Internal Rate of Return (IRR) for Gaewelyn's business? (Please round your answer to two decimal points, Le., XXXX%) (3) Gaewelyn estimates that, if the economy is in recess at the end of the 15 years, she can sell the assets for $50,000. Assuming the tax rate of 30%, what is the net after-tax cashflow Gaewelyn will receive from selling her assets at the end of 15 years? (Please round your answer to the nearest dollar) $1 (4) If Goewelyn is able to sell her assets for $50,000, as mentioned in (3) above, what is the Net Present Value (NPV) for Gaewelyn's business? (Please round your answer to two decimal points) $ Gaewelyn is considering opening a new business for a long-term care facility. The initial investment for the business is $650,000, which includes constructing the housing unit and purchasing other assets. For tax purposes, the projected salvage value of all the assets is $80,000. The government requires depreciating the assets using the straight-line method over the business's life of 15 years. Gaewelyn is trying to estimate the net cashflows after tax for this business. She has already figured out that the business will generate an annual after-tax cash inflow of $85,000 from the operation. She now needs your help to estimate the net cash inflow that she will receive from selling the facility's assets at the end of 15 years. Goewelyn's required return is 8%. Required: (1) Gaewelyn estimates that, if the economic is booming at the end of the 15 years, she can sell the assets for $118,000. Assuming the tax rate of 30%, what is the net after-tax cashflow Gaewelyn will receive from selling her assets at the end of 15 years? (Please round your answer to the nearest dollar) $[ (2) If Gaewelyn is able to sell her assets for $118,000, as mentioned in (1) above, what is the Internal Rate of Return (IRR) for Gaewelyn's business? (Please round your answer to two decimal points, Le., XXXX%) (3) Gaewelyn estimates that, if the economy is in recess at the end of the 15 years, she can sell the assets for $50,000. Assuming the tax rate of 30%, what is the net after-tax cashflow Gaewelyn will receive from selling her assets at the end of 15 years? (Please round your answer to the nearest dollar) $1 (4) If Goewelyn is able to sell her assets for $50,000, as mentioned in (3) above, what is the Net Present Value (NPV) for Gaewelyn's business? (Please round your answer to two decimal points) $
Expert Answer:
Answer rating: 100% (QA)
To calculate the net aftertax cash flow and the internal rate of return IRR for Gaewelyns business we need to consider the cash inflows and outflows o... View the full answer
Related Book For
Posted Date:
Students also viewed these accounting questions
-
Gaewelyn is considering opening a new business for a long-term care facility. The initial investment for the business is $650,000, which includes constructing the housing unit and purchasing other...
-
Your company is considering opening a new factory in Latin America and management is evaluating the specific country locations for this direct investment. The pool of candidate countries has been...
-
The Bates Pet Motel Company is considering opening a new branch location. If it constructs an office and 100 pet cages at its new location, the initial outlay will be $100,000, and the project is...
-
Your friend has just started a retail clothing store in kamloops. She will be purchasing inventory to make her own clothing (One Style) and she will also be buying ready to sell iteams. She has come...
-
To what extent can personal creditors seek recovery from partnership assets?
-
Sketch the graphs of the following functions. f(x) = -3x 3 - 6x 2 - 9x - 6
-
Refer to the event tree in Figure 3.10 and the data in Table 3.6. Suppose the company operating this CSTR decides to hire an expert operator in response to the runaway reaction in April. This...
-
Titan Mining Corporation has 8.5 million shares of common stock outstanding, 250,000 shares of 5 percent preferred stock outstanding, and 135,000 7.5 percent semiannual bonds outstanding, par value...
-
Hurst, Inc. sold its 8% bonds with a maturity value of $9,000,000 on August 1, 2019 for $8,838,000. At the time of the sale the bonds had 5 years until they reached maturity. Interest on the bonds is...
-
Draft a quarterly cash budget for the Zoo Extravaganza (ZE) for the first two quarters of the coming year. Use just the information in this problem. 1. Interest is paid on the last day of the year...
-
Consider the index below that consists of just four stocks: Stock Price Number of Shares Outstanding T 100,000 C N J $10 20 30 40 10,000 200,000 50,000 1. If the price of Stock N goes from $30 to...
-
What are the six steps and procedures common to both PERT and CPM?
-
Which phases are included in a statistical process control for product or service being produced? a. establishing standards b. monitoring standards c. taking corrective action d. all of the above
-
The utilization factor for a system is defined as a. mean number of people served divided by the mean number of arrivals per time period. b. the average time a customer spends waiting in a queue. c....
-
What is balking? In which queuing system phase is it found?
-
Which of the following would not have a FIFO queue discipline? a. Fast-food restaurant b. Post office c. Checkout line at grocery store d. Emergency room at a hospital
-
(a) Vinay lives in a world of 2 time periods: 'today' and 'tomorrow'. At the begining of each period he earns 210. If the interest rate in each period is 0.5, what is the present value of his...
-
Which task is performed by a book-keeper? A. Analysing the trading results B. Entering transactions in the ledger C. Preparing year-end financial statements D. Providing information for...
-
A university Web server has five main components, each with the same reliability. All five components must work for the server to function as intended. If the university wants to have a 95 percent...
-
Explain the concept of cycle time and how it affects output. Give an example.
-
Bill Maze, recently hired by Custom Computers, Inc., has suggested using the economic order quantity for the heat sinks. Using the information in Problem 9, calculate the following: (a) Economic...
-
Colors of fabrics at a clothing store. Determine whether the data are qualitative or quantitative. Explain your reasoning.
-
Weights of bricks at a construction site. Determine whether the data are qualitative or quantitative. Explain your reasoning.
-
Marital statuses mentioned in an employment form. Determine whether the data are qualitative or quantitative. Explain your reasoning.
Study smarter with the SolutionInn App